*******************************************************
Following is the speech by the Financial Secretary, Mr John C Tsang, at the first Certified Tax Adviser Conference organised by the Taxation Institute of Hong Kong today (November 28):
Joseph, Kenneth, distinguished guests, ladies and gentlemen,
Good morning.
I am indeed very pleased to join you all this morning at the first Certified Tax Adviser Conference organised by the Taxation Institute of Hong Kong.
Taxes are one of my favourite subjects. They are also one of Google's favourite subjects. All you need to do is to type in "tax jokes" and you get 27,700,000 jokes, mostly pretty bad jokes, but I must admit there are still a few thought-provoking samples. Here's one of them: "If you get up early, work late, and pay your taxes, you will get ahead - if you strike oil."
That one was from America's J Paul Getty, the billionaire founder of the Getty Oil Company.
Well, Mr Getty, you don't have to strike oil in Hong Kong to get ahead. Not with our tax regime; not while I'm still Financial Secretary. I'm glad I got that out of the way.
The theme of today's conference is "Tax Transparency - Are You Ready?". This is, indeed, a most timely subject. Enhancing tax transparency with a view to preventing cross-border tax evasion is one of the hottest topics in the international arena in the last few years.
Earlier this month, I attended the G20 Leaders' Summit in Brisbane, Australia, as a member of the Chinese delegation. Participants attached great importance to the implementation of the automatic exchange of financial account information in tax matters as a new global standard. To date, more than 90 jurisdictions have indicated their commitment to this new standard. The first phase of information exchange is scheduled to start by end-2018 at the latest.
The international landscape on enhancing tax transparency has been evolving at an unprecedented rate. As a world-class financial centre as well as a responsible member of the international community, Hong Kong has been making substantial effort in upholding the latest international standards in this regard.
In fact, we have been liberalising our exchange of tax information arrangement in the past few years. If you remember, in 2010, we amended our tax law to remove the domestic tax interest requirement in exchanging information on request. In 2013, we put in place a legal framework for entering into tax information exchange agreements with other jurisdictions.
Tax information exchange agreements, as you are well aware, are standalone agreements effecting tax information exchanges without providing double taxation avoidance arrangements as provided for in the comprehensive avoidance of double taxation agreements.
Hong Kong has indicated in September this year our support for implementing the new global standard, on a reciprocal basis, with appropriate partners - those that can meet requirements on the protection of privacy and confidentiality of information exchanged, while ensuring proper use of the data. I remember that very clearly because I wrote the letter. Our target is to begin our first information exchanges by the end of 2018, on the condition that Hong Kong could put in place the necessary domestic legislation before then. And that is not an easy task. I noted that the Legislative Council is holding up quite a bit so Kenneth is going to need to help us on that.
With its reference to "automatic", the new standard has aroused a lot of concerns. I would like to clarify that "automatic exchange" does not mean that there will be free flow of information to all jurisdictions. Rather, it involves the systematic and periodic transmission of financial account information by the source jurisdiction to the jurisdiction of residence of the account holders on an annual basis. And it concerns all types of investment income, account balances or values, as well as sales proceeds from financial assets.
The exchange partners need to enter into a Competent Authority Agreement, which provides the legal basis for the exchange. The exchange has to be conducted within the confines of the agreement signed between the tax authorities of the jurisdictions concerned.
Two weeks ago, Hong Kong signed an Inter-governmental Agreement with the US to facilitate compliance with the US Foreign Account Tax Compliance Act, FATCA, by the institutions in Hong Kong. FATCA requires financial institutions outside the US to report financial account information on US taxpayers to the US Inland Revenue Service.
Since the new global standard on the automatic exchange of financial information in tax matters is basically modelled on FATCA, we believe that financial institutions in Hong Kong could use their institutional arrangements for FATCA to meet the reporting requirements under the new international standard.
Of course, we understand that differences remain between the two arrangements in reporting financial institutions, as well as reportable accounts and due diligence procedures. We shall continue to maintain close liaison with the financial sector and also with the taxation institute in addressing their concerns about implementing the new standard.
In enhancing tax transparency, we are mindful of the need to protect the privacy and confidentiality of information exchanged. The new standard offers explicit clauses on protecting confidentiality. And we would strive to uphold confidentiality rules and safeguards consistent with the international standard.
Ladies and gentlemen, Hong Kong is now facing new challenges concerning tax transparency, and such challenges are now evolving rapidly. That said, we shall respond positively in order to maintain our international reputation as well as our competitiveness, while taking into account local concerns and needs.
Our priority now is to formulate legislative proposals for the new standard. As I said earlier, it will not be an easy task, given the extremely tight schedule for getting the necessary domestic legislation in place by 2017. But I am confident that the relevant stakeholders, and they include many of you here, will continue to provide Government with your support in taking forward this area of work. I look forward to hearing your views as we develop more concrete thoughts on taking the matter forward.
I wish you all a fruitful conference today. And may you strike oil tomorrow.
Thank you very much.
Ends/Friday, November 28, 2014
Issued at HKT 12:16
NNNN
Windows Media format
Flash format