Consultation on Provision of Legal Framework for Entering into Tax Information Exchange Agreements (TIEAs)

Comments from ACCA Hong Kong to The Secretary for Financial Services and the Treasury, Hong Kong, June 2012.

ACCA Hong Kong has been long supporting the entering into more Comprehensive Avoidance of Double Taxation Agreements (CDTAs) and believes that the initial focus to sign such CDTA with Hong Kong’s trading partners is the right direction. This will help bring in true benefits from trade and investments. However we need to consider other strategic partners as we move on and the OECD’s minimum requirement in order not to be blacklisted.

As for TIEAs, it was the recommendation of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) for Hong Kong to establish the legal framework for entering into TIEAs. In order not to expose Hong Kong to the unnecessary risk of economic sanctions in the absence of any TIEA powers or network, we agree to the proposal of having such a legal framework be put in place.

However, even when the legal framework for TIEAs is in place, we request that the government, as stated in paragraph 27 of the consultation document, will continue to give priority to CDTA negotiations and expansion of our CDTA network.

We have the following suggestions regarding the implementation of the framework.

  1. In choosing TIEA partners, we consider it important that Hong Kong only enters into TIEA with other countries with a mutual commitment to sign CDTAs in an agreed timeframe within a reasonable duration. We also recommend that upon the failure of the trading partner in meeting the time requirement to sign a CDTA, the TIEA already signed should be terminated. As such, Article 13 of the model TIEA on Termination should be cautiously considered.

  2. We note that the government has already started but not yet finalised CDTA negotiations with a few countries. We consider even if there is a legal framework for TIEAs, it is not to shift the existing CDTA negotiation to a TIEA.

  3. In the model TIEA, the Commentary says that bilateral TIEA “will cover, at a minimum, the same four categories of direct taxes, unless both parties agree to waive one or more of them”. To minimise the resources implications to the Hong Kong government, we suggest that any TIEA that Hong Kong will enter into will only cover taxes which are common to both contracting parties.

  4. Taxpayer privacy is often cited as a matter of concern in exchange of information. To address this concern, it is critical that any exchange of information can only be conducted upon request and the safeguards of data confidentiality adopted under TIEA should not be less than those under the existing Exchange of Information (EoI) arrangement.

    However, we consider it necessary for the Administration to ensure that there is no inconsistency or gap between the proposed TIEA to be entered into and other laws / regulations in Hong Kong concerning statutory protection of privacy.