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. Before the bill was passed yesterday, the secretary for financial services and the treasury, Professor Chan Ka-keung, said: 'We are glad that some countries, upon knowing our decision to amend the law, have actively invited us to start the negotiation of a CDTA. We hope that after passing the bill, there will be breakthrough in the negotiations.' Peter Kung, past president of the Taxation Institute of Hong Kong, said the institute supported the legislation. 'It will make Hong Kong an even better place [for investment]. For example, a company from the mainland or other places can use Hong Kong as a springboard to do business in another country, thus enhancing Hong Kong's international status.' Evan Blanco, chairman of the taxation committee at the American Chamber of Commerce in Hong Kong, said the move would benefit both expatriates and locals, noting that even many tax havens were adopting the latest standards. Blanco said, for example, if the city signed a CDTA with South Korea, an person from Hong Kong would not be taxed by the South Korean government if he went there for work for less than six months. At the same time, South Korean subsidiaries of Hong Kong companies would enjoy reduced withholding tax rates. Accountancy lawmaker Paul Chan Mo-po said the change would affect only foreign citizens who tried to evade paying their country's taxes by setting up offshore companies and accounts for hiding assets in Hong Kong. He believes there are few such people in Hong Kong. The city's tax rules fell under the international spotlight during the Group of 20 meeting in London in April last year, which endorsed an internationally agreed tax standard drawn up by the Organisation for Economic Co-operation and Development (OECD). Hong Kong narrowly avoided appearing on an OECD blacklist at the summit. Hong Kong and Macau were mentioned in a footnote as territories that had committed to implement the internationally agreed tax standard.
