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Latest development of international tax regime

A gist of the blog:

Recently, two pieces of international news related to tax have drawn much attention. The first one is that the two chambers of the United States Congress might reach consensus on tax reform proposals within short period of time. Economies around the world are naturally concerned about the possible “spillover effect” of the tax reform in the largest economy in the world. Some also worry that economies might engage in a new round of international tax competition in order to stay competitive.

The second news is about the list of non-cooperative jurisdictions for tax purposes released by the European Union. Hong Kong is not one of the 17 jurisdictions on the list, but we are being put on the watch list together with other 46 jurisdictions. While the EU took a positive view on the efforts made by Hong Kong in the areas of tax transparency, fair taxation and implementation of measures to counter base erosion and profit shifting, the EU will monitor the progress of the implementation of relevant measures in the coming year. As an international financial centre and a responsible member of the international community, Hong Kong must support efforts to enhance tax transparency and combat tax evasion, and should not participate in any form of vicious competition among those tax havens.

For Hong Kong, while we pay close attention to these developments, we have to stay calm and make a sound judgement based on rational and objective assessment of our own situation. The current profits tax rate in Hong Kong is only 16.5%, we do not impose capital gains tax and all imports are tax-free except vehicles, liquors, gasoline and tobacco. Hong Kong’s tax system is highly competitive internationally. As such, the Government will not rush into introducing an across the board reduction in the tax rate.

December 10, 2017