A recent crackdown on countries that make themselves readily available for people and companies to avoid taxes has led to a shift in assets from traditional tax havens such as Gibraltar, the Cayman Islands, or Switzerland to Hong Kong and Singapore, tax consultants say. A meeting between more than 30 members of the Organisation for Economic Co-operation and Development (OECD) last September resulted in the Seoul Declaration, in which member countries agreed to work together to improve tax administration and address the significant and growing problem of international non-compliance with national tax requirements - or the practice of avoiding taxes through offshore tax havens. OECD countries have signed an agreement to exchange information to counter harmful tax practices. Because Hong Kong is not a member of the OECD, it is therefore not obliged to provide such information. If EU residents earn interest on money banked in Hong Kong that interest is taxable in the EU state they are resident. Failure to report is tax evasion in the EU. Many EU residents who previously banked in Gibraltar, Cayman Islands or Switzerland have moved their portfolio to places not covered by the OECD, including Hong Kong and Singapore. The recent abolition of estate tax in Hong Kong has made it an even more attractive option worthy of consideration by those seeking to secure their assets and protect them from unfair taxation. 'Hong Kong's taxation system is different from the members of the OECD countries, it is therefore easier for these countries to come to an agreement. For example, income from a Hong Kong company based in France is tax-exempt, whereas a French company operating in Hong Kong has to pay taxes back in its own country,' said Jennifer Wong, tax partner for accounting firm KPMG. Offshore Financial Centres (OFCs) are often portrayed as financial parasites, sapping away tax and revenues that could be used for public services. International organisations such as the OECD have exerted economic pressure to introduce transparency and exchange of information procedures among OECD member countries. According to the OECD, a tax haven is a jurisdiction which actively makes itself available for the avoidance of taxes which would otherwise be paid in a higher tax jurisdiction. These tax havens are typically small and make a living primarily by attracting overseas capital. What they offer wealthy clients is low or no taxes, business-friendly regulations and above all confidentiality - no information-sharing agreements with other governments. Ms Wong said Hong Kong had an exchange of information agreement with some countries, having recently entered a double tax treaty with OECD country Belgium. 'Hong Kong does have a low tax rate, but it is not a tax haven. It is recognised globally as a country with a very good infrastructure and tax system. That's one of the reasons it is attractive to residents from countries with high tax rates,' Ms Wong said. Deborah Annells, managing director of Hong Kong-based firm Azure Tax and a chartered tax adviser who is qualified to practice in Britain, agreed. 'Many companies here are tax free because Hong Kong has a territorial basis of taxation. If the profits are not sourced in Hong Kong then they are offshore profits and tax free,' said Ms Annells. 'Hong Kong has a successful stock market and lots of money is coming in but, most important, is that it is a well-regulated but friendly jurisdiction and that is the strength of the Hong Kong economy.' More than 73,000 new Hong Kong companies were incorporated last year and there are now more than 800,000 companies on the Hong Kong companies register. Owning properties in a company registered in a low or zero tax jurisdiction offers a wide array of tax planning opportunities for Hong Kong residents who wish to conduct business or make investments abroad. Issues arise as to how to handle cross-border investments and money transfers lawfully. 'There are legitimate reasons for using tax haven companies. They are useful for purchasing properties, or for holding a bank account or a securities account. A taxpayer can save on inheritance tax or estate duty, and they are useful for other tax structures. I wouldn't want to see these OFCs abolished, just policed and monitored much better,' said Ms Annells. 'There are a number of small corporate service providers, non-qualified and non-regulated practices that make their money from selling tax haven companies, no questions asked. You don't have to be qualified to do that. We don't like to be associated with them. We are a legitimate practice and we provide advice on a proper but tax-efficient structure to withstand scrutiny by relevant tax authorities. We are a tax practice and we are qualified to give advice.' Ms Annells stressed the importance of using a legitimate tax professional and not to rely on bankers or friends who are not qualified or accountable for any tax advice they may give. She also said that it was legitimate to buy property in Britain through a British Virgin Islands company. However, when a British taxpayer uses such offshore jurisdiction companies to hide bank deposits from tax authorities then it is a crime. British tax authorities now had the bank account details of several offshore accounts of British residents, who had until next Friday to come clean, Ms Annells added. More people realise the importance of adopting proper tax structures due to the increasingly complex regulations and laws. It is not known how many offshore companies are incorporated by Hong Kong corporate service providers because they are not regulated. And while the OECD continued its efforts to crack down on tax havens, the head of one Hong Kong trust company said he did not see the point. Jacques Scherman, managing director of Sovereign Trust (Hong Kong), said: 'Tax havens are already intensely scrutinised and subject to strict anti-money laundering regulations. I do not think further scrutiny will achieve any useful end. 'No client has ever come to us with a question like 'how can I arrange my affairs in such a way that I pay more tax?' or 'please can you assist me to set up a structure that conforms in every respect to the OECD's rules and regulations?' 'These laws have actually helped to promote tax havens. By applying so much pressure, the financial services provided and due diligence measures undertaken by tax havens are as good as the services offered in most onshore jurisdictions.' It remains to be seen whether the OECD crackdown, the Seoul Declaration and other initiatives are successful in reducing the number of tax haven companies.