MACAU BUSINESS
Mutual Administrative Assistance in Tax Matters of the Organisation for Economic Co-operation and Development (OECD), and did not commit to resolving the issue by end-2018. The treaty, formulated by the OECD and the Council of Europe in 1988, and updated in 2010, is a multilateral instrument facilitating all forms of tax co-operation in order to crack down on tax avoidance among its signatories. China signed the treaty, which came into force in
2016, in 2013 but its two Special Administrative Regions – Hong Kong and Macau – have yet to adopt the treaty. The Asian financial centre is placed among 47 jurisdictions on the EU’s grey list of tax havens, as Hong Kong has pledged to comply with its standards by 2019.
Biased and unfair
jurisdiction was ‘unilateral and biased’. The city’s membership of the OECD initiatives – the Global Forum on Transparency and Exchange of Information for Tax Purposes, and Inclusive Framework on Base Erosion and Profit Shifting – underscore its endeavours to enhance tax transparency to meet the latest international standards, the statement reads. It added that the Administration has remained in close contact with the EU and other international bodies on the matter, and is now working closely with Mainland authorities to adopt the tax convention in the city, ensuring the gaming enclave is taken off the blacklist soon. José Luís de Sales Marques, a locally based economist and president of the Institute of European Studies of Macau, remarked that the inclusion of the city on the blacklist is “unfair” and “baffling” given other well-known tax havens such as the Cayman Islands and the Virgin Islands have been placed on the grey list. The decision reflects that “the EU does not have a clear grasp of the real situation of Macau,” he said, as more work tackling tax avoidance has been undertaken in recent times. In May, the Legislative Assembly approved the Law
T
on Exchange of Information on Tax Matters to comply with an OECD initiative – the Common Reporting Standard and Due Diligence on Financial Account Information – which requires jurisdictions to obtain information from their financial institutions such as information on certain types of account and taxpayers, and automatically exchanges information with others on an annual basis. The territory’s financial institutions have collected the relevant information since July, with the system for automatic exchange to be ready this year, according to the information provided to legislators at the time. Describing the EU move as “interference” in the
governance of Macau, Mr. Sales Marques added: “[It] cannot force the city to change its [tax] regime that has been in place for years.” One of the criteria for the evaluation of whether a jurisdiction is a tax haven concerns harmful tax practice such as tax
20 JANUARY 2018
he Macau SAR Government responded in a strongly worded statement that the city’s designation as a ‘non-cooperative’ taxation
incentives for activities that are isolated from the domestic economy and tax benefits reserved for non-residents.
Quick adoption P
an-democratic legislator Au Kam San was also flabbergasted that the gambling enclave had been placed on the tax haven list. “This will
certainly affect the image of Macau…but [I think] the government will address the issue as soon as possible as it has done in other areas.” He refers to the Administration’s endeavours in the past few years to improve its rules on fighting money laundering and terrorism financing in compliance with international standards. A few days after the EU decision, Chief Executive
Fernando Chui Sai On held a meeting at Government Headquarters on December 12 with a delegation of EU representatives and the consular representatives of several EU countries based in either Hong Kong or Macau. Mr. Chui told the delegation, quoted in a government statement, that it is “working diligently on the adoption in Macau of the Convention on Mutual Administrative Assistance in Tax Matters…[which]…would be helpful in ensuring Macau [is] taken off the EU list of ‘non- cooperative’ taxation jurisdictions.” “Macau [is] looking forward to closer ties with the
European Union in order to promote further the city’s development,” Mr. Chui was quoted as saying. The 28-nation bloc has said it plans to update the list once a year, which means the city could be de-listed as soon as this year should it meet the requirements. It is expected that the inclusion of Macau on the tax haven list would not have a huge impact upon the relationship between the gambling enclave and the bloc for the moment. But the longer the city remains on the list the greater the impact will be as no EU
“
Three criteria for blacklisting
The European Union has set up a blacklist of so-called tax havens triggered by three main requirements Transparency: The jurisdiction should comply
with international standards on automatic exchange of information, ratify the multilateral convention in tax matters of the Organisation for Economic Co-operation and Development (OECD), and sign bilateral agreements with all EU members to facilitate tax information exchange Fair Tax Competition: The jurisdiction should not adopt
harmful tax regimes; for instance, it should adopt zero-rate corporate taxation so that no offshore business without real economic activity could benefit BEPS: The jurisdiction should adopt the minimum
standards of OECD’s Base Erosion and Profit Shifting (BEPS), an initiative tackling those who shift profits to low or no-tax locations
I’m not concerned it will affect the confidence of international investors,
says Alvin Chau, Chief Executive of local junket operator Suncity Group
”
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