Hong Kong in international tax talks to help defend local companies

The Hong Kong government is in talks with international bodies to defend the interest of local companies, which face a heavy tax reporting burden as the US and other countries step up rules to crack down on tax dodgers.

"Hong Kong has very low and simple tax rates and many of our companies fail to understand why we need to do the reporting for other countries where they have complex tax rules," said the secretary for financial services and the treasury, Chan Ka-keung.

He said there would be big changes in international reporting conditions as the Group of 20 seeks an international agreement for tax information sharing Hong Kong will find difficult to avoid.

Even before such an agreement comes into being, the US from July 1 will introduce the Foreign Account Tax Compliance Act (Fatca) that would require financial firms around the world, including all banks and brokers from Hong Kong, to report to the Internal Revenue Service (IRS) in Washington on the accounts of clients who are American citizens or permanent residents.

"We are aware of the big changes in international standards on tax information exchange," he said, adding the government would lobby for the provision of not putting an excessive reporting burden on local firms as the city is not a tax haven.

"Hong Kong has a very low tax rate and sometimes that attracts suspicion. We would like to let the world know that just because we have low tax rates does not mean we are a tax haven."