Hong Kong Signs on to New OECD Global Tax Standards
HONG KONG – The government of Hong Kong has recently announced that it will support the Organization for Economic Cooperation and Development’s (OECD) new global standards on the automatic exchange of information for the purpose of enhancing tax transparency and combating cross-border tax evasion.
Earlier this year, the OECD released a Common Reporting Standard for the Automatic Exchange of Financial Account Information in Tax Matters. This new standard called for governments to obtain detailed account information from their financial institutions and exchange that information automatically with the jurisdictions of residence of account holders on an annual basis.
Hong Kong’s Secretary for Financial Services and the Treasury, Professor K.C. Chan, explained that “it is crucial for Hong Kong to adopt the latest global standards on tax transparency in order to maintain our international reputation and competitiveness as an international financial and business center.”
The government also stated that it will implement the new standards on a reciprocal basis with any partners who are able to meet the requirements.
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OECD continued…
Also this month, the OECD released its initial recommendations for dealing with the problems of base erosion and profit shifting (BEPS).
According to OECD Secretary-General Angel Gurría, “the G-20 has identified base erosion and profit shifting as a serious risk to tax revenues, sovereignty, and fair tax systems worldwide.” The new recommendations are the first steps towards remedying this complex problem.
The OECD has released seven “deliverables” (it hopes to have 15 finalized by December 2015), which have the goals of:
Ensuring the coherence of corporate income taxation at international level through new model tax and treaty provisions to neutralize hybrid mismatch arrangements (Action 2);
Realigning taxation and relevant substance to restore the intended benefits of international standards and to prevent the abuse of tax treaties (Action 6);
Assuring that transfer pricing outcomes are in line with value creation through actions to address transfer pricing issues in the key area of intangibles (Action 8);
Improving transparency for tax administrations and increasing certainty and predictability for taxpayers through improved transfer pricing documentation and a template for country-by-country reporting (Action 13);
Addressing the tax challenges of the digital economy (Action 1);
Facilitating swift implementation of the BEPS actions through the development of a multilateral instrument to amend bilateral tax treaties (Action 15); and
Countering harmful tax practices (Action 5).
The OECD hopes that once these are implemented, along with the eight others, “the measures will ensure the coherence of corporate tax systems in a cross-border environment, introduce substance requirements in the area of tax treaties and transfer pricing, and ensure transparency while promoting certainty and predictability.”
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