Hong Kong was named among the thirty uncooperative tax jurisdictions in the European Commission’s (“EC”) tax haven blacklist released on June 17, 2015. The tax jurisdictions on the aforesaid list had been flagged up by ten or more European Union member states. Six of the thirty countries blacklisted are former British territories. Countries notable by their absences include Jersey, Luxembourg and Switzerland, whose secretive tax system are well-known to the world.
Hong Kong government said that the EC decision to blacklist them as a tax haven as totally unfounded and groundless. Hong Kong government also stressed that they have signed agreements with three EU member states to avoid double taxation so far, two of which have come into force, and thus it is unfair to Hong Kong that the EC did not take these agreements into account when making the list.
The EC Tax Haven Blacklist
The full list consists of thirty non-EU member states as shown in the table below.
|Antigua and Barbuda||Guernsey||Niue|
|Belize||Liechtenstein||St Kitts and Nevis|
|Bermuda||Maldives||St Vincent and the Grenadines|
|British Virgin Islands||Marshall Islands||Turks and Caicos|
|Brunei||Mauritius||US Virgin Islands|
The EU Member States which blacklisted HK
The ten EU member states which blacklisted Hong Kong as tax haven are shown in the table below.
EU Member States
Any Comprehensive Double Tax Agreement (“CDTA”) signed with HK?
Why there is such a list?
A number of EU member states assess how countries and territories around the world apply standards of tax good governance. The criteria used by the relevant EU countries in their assessment are essentially (i) compliance with tax transparency and exchange of information standards; and (ii) absence of harmful tax measures and adopt fair tax competition.
The Different Views of EC, OECD and HK Government
As shown in the table above, the list comprises of thirty territories, with Hong Kong and Brunei labelled as tax havens in Asia. The EC explained to the media that the blacklist can be able to give pressure to the uncooperative jurisdictions to adopt international standards on tax transparency. On the other hand, the Organisation for Economic Cooperation and Development (“OECD”) has expressed to the public its concern over the list and pointed out that most of the territories on the list are cooperative tax jurisdictions instead. In Hong Kong, the government regrettably stated that the EC might have ignore the updates that Hong Kong has signed three double tax agreements with three out of ten states (i.e. Italy, Portugal and Spain) that have accused Hong Kong, and two agreements (i.e. HK-Portugal CDTA and HK-Spain CDTA) have already been effective. The Hong Kong government also emphasised that the Global Forum on Transparency and Exchange of Information for Tax Purposes has already recognized Hong Kong's efforts in its two-phase peer review in 2011 and 2013. As a consequence, the Hong Kong government believed that some parties in the EC might have made the mistake of thinking that Hong Kong is a tax haven due to its simple tax system and they will work hard to change that subjective perception.
Hong Kong is well-known to be supportive of international efforts to enhance tax transparency and combat tax evasion for many years. OECD as well as some of the big EU member states which have signed CDTA with Hong Kong including Belgium, France, Ireland, Netherlands and the UK also recognised the contribution of Hong Kong in these respect. To date, Hong Kong has already signed thirty two CDTAs and seven Tax Information Exchange Agreements (“TIEA”). Amongst the twenty eight EU member states, Hong Kong has already signed thirteen CDTAs and two TIEAs. As an international financial centre and a responsible member of the international community, Hong Kong is proactively committed to enhancing tax transparency and combating cross-border tax evasion. To this end, the allegation that Hong Kong is an uncooperative tax jurisdiction or a tax haven is doubtful and groundless. Conversely, it is strongly believed that Hong Kong is always an ideal place for foreign investment given her well-established legal system, simple tax regime as well as no foreign exchange control, etc.
It is suggested that the Hong Kong government should continue dialogue with the EU and its member states so that they are kept abreast of Hong Kong’s commitments and efforts on tax cooperation, taking into account the fact that negotiations on CDTA and TIEA with five other EU member states are also under way. In such a case, Hong Kong shall be able to get rid of her name from the list, thereby maintaining her competitive edge and achieving sustainable development as an excellent platform for worldwide investors.
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|Catherine LE BOURGEOIS |
|Wilson YEUNG |
International Tax Director
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