Lawmakers passed a bill yesterday that gives Hong Kong tax authorities greater power to gather information on suspected tax evaders and send it to authorities abroad.
The move aims to fend off accusations that the city is a tax haven.
The amendment to the Inland Revenue Ordinance will enable Hong Kong to adopt the latest international standards on exchanging information on the comprehensive avoidance of double taxation agreements, also known as CDTAs.
Tax authorities will have the authority to obtain information - using search warrants if necessary - that may affect any liability, responsibility or obligation of anyone under the laws of a CDTA partner concerning taxes of that territory. Hong Kong has so far concluded five CDTAs, with Belgium, Thailand, the mainland, Luxembourg and Vietnam since 2003. The Financial Services and Treasury Bureau did not reveal which nations were involved in current talks and the progress of negotiations.
The move comes as a bill is progressing through the US Congress to extend a crackdown on Americans evading tax overseas. In February, Swiss bank UBS agreed to a US$780 million settlement with the US government over charges it helped rich Americans evade US taxes. Several of the UBS clients hid money in dummy corporations in Hong Kong.
The government said it would adopt the 'most prudent' version of the standard to protect the privacy of firms and individuals, and ensure confidentiality. Relevant tax jurisdictions would need to prove their request was necessary or relevant to avoid 'fishing expeditions', and must treat the information as secret under their domestic laws.