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This Week in AsiaGeopolitics

Hong Kong, Singapore and China get tough on tax havens

In an effort to create a ‘level playing field’, Asian economies are committing to new standards of transparency

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Last year, the EU Commission ordered Ireland to demand Apple cough up €13 billion (HK$1.2 trillion) for getting favourable tax benefits from the tax haven. Handout photo
Resty Woro Yuniar
At the risk of losing some foreign investors, Asian jurisdictions are stepping up efforts to combat corporate tax avoidance to meet new global transparency standards. More than a dozen Asia-Pacific jurisdictions have committed to the Automatic Exchange of Information, an initiative led by the Organisation for Economic Cooperation and Development (OECD) to boost tax transparency and to combat cross-border tax evasion that went into effect in January. Members such as Indonesia, Hong Kong, Singapore, and China agreed to bilateral reporting of taxpayers’ financial data that would commence in 2018. Governments hope to ramp up collections to help fund infrastructure projects and lift their economic growth.

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“The OECD’s recommendations provide policy options to tackle international tax avoidance, which represent international consensus on the different tax avoidance issues,” says Antony Ting, associate professor of business law at the University of Sydney Business School. “Besides this multilateral approach, governments may also consider unilateral measures which have already proved to have positive impact on [multinationals’] behaviour and increased tax revenue.”

Global companies have a long history of complicated tax structures, but recent legal battles between European regulators and American multinationals fostered public anger over aggressive tax planning practices which forced politicians in Asia to act, experts said.

Google agreed to pay €306 million (HK$2.8 billion) and £130 million (HK$1.3 billion) to settle ongoing tax disputes in Italy and UK. Handout photo
Google agreed to pay €306 million (HK$2.8 billion) and £130 million (HK$1.3 billion) to settle ongoing tax disputes in Italy and UK. Handout photo
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Google, for example, agreed to pay €306 million (HK$2.8 billion) and £130 million (HK$1.3 billion) to settle ongoing tax disputes in Italy and Britain, respectively. Last year, the EU Commission ordered tax haven Ireland to demand Apple cough up €13 billion (HK$1.2 trillion) following a ruling that the tech giant had received favourable tax benefits.

“This move is further fuelled by the fact that many governments have been facing decreasing revenue since the global financial crisis,” Ting said.

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As Western countries struggled to recover from the global financial crisis in 2008, Asian markets contributed sensible growth for multinational enterprises due to their increase of private wealth. The Asia-Pacific region, excluding Japan, is projected to account for 26 per cent of all global financial wealth by 2019, according to research and consultancy firm Boston Consulting Group.

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