Hong Kong likely to be removed from European Commission tax blacklist

European Commission list identifies the city as one of 30 non-cooperative tax jurisdictions, reports the South China Morning Post.

The European Commission is likely to remove Hong Kong from its list of top 30 tax havens, according to a source familiar with the situation.

The source, who cannot be identified, told the South China Morning Post the Hong Kong government had been lobbying to remove the city from the list.

“The Hong Kong government has submitted evidence to the EC showing that while Hong Kong charges low tax, it does not mean we help people or companies to avoid paying taxes to their home countries,” the source said.

Hong Kong in June was added to the list of 30 countries labelled as non-cooperative tax jurisdictions published by the EC, a move that the source described as a “surprise” to the Hong Kong government.

“The inclusion of Hong Kong on the EC’s blacklist was a result of technical error,” the source said. “The government was surprised by the decision to include the city in that list.

“Hong Kong was not given any opportunity to clarify its position before the EC made the decision, which was unfair.”

According to the source, Secretary for Financial Services and the Treasury Chan Ka-keung wrote two letters, in June and July, to the EC to protest against the decision.

In addition, officials at the Hong Kong Economic and Trade Office in Brussels have also been lobbying EC officials in the past few months to explain the efforts made by Hong Kong to help other countries crack down on tax avoidance.

“These efforts have been fruitful,” the source said. “Spain has confirmed it has removed Hong Kong from its blacklist. The EC also promised to revise its list, which indicates a high chance for Hong Kong to be removed from it. We refute any allegation regarding Hong Kong being a tax haven. We wish to see the EC remove the city from the list as soon as possible.”

Tim Lui Tim-leung, a senior adviser of PWC and veteran tax specialist, said it was important for Hong Kong to be removed from the list as its inclusion had tainted the image of Hong Kong companies and individuals.

“Hong Kong does not charge any tax on capital gains, dividend, deposits or estate duty,” Lui said. “The majority of people and companies are paying very low tax. This has attracted international companies and talents to work here. They are not coming for tax avoidance.

“Hong Kong has been a responsible global participant. Our law and reporting regime have helped other tax authorities to crack down on tax avoidance.”

Hong Kong has signed 32 agreements for the avoidance of double taxation and seven tax information exchange agreements with these markets to enable exchange of tax-related information. Fourteen of these jurisdictions are among the top 20 trading partners of Hong Kong.

The city is also in talks with 15 other countries for similar tax treaties.

Lui said the government had been seeking a change to its tax legislation to adopt the latest global standards on automatic exchange of financial account information in tax matters, which will be submitted to the Legislative Council early next year.

If it is passed by lawmakers, the exchange of information under the agreement would begin in 2018.