MR CHAN CHUN-YING (in Cantonese):
Deputy President, Hong Kong has been crowned the world’s most competitive economy for the second consecutive year in the World Competitiveness Yearbook 2017 released at the end of last
month by the International Institute for Management Development in Lausanne, Switzerland. As a premier international financial centre in Asia, Hong Kong must maintain its competitiveness, but at the same time, it is also imperative for it to fulfil its obligations as a member of the international community. This time, in introducing the Inland Revenue (Amendment) (No. 3) Bill 2017 (“the Bill”), the Government seeks to comply with the latest requirements promulgated by the Organisation for Economic Co-operation and Development (“OECD”) with a view to joining forces with different countries to combat cross-border tax evasion.
I support the passage of the Bill.The spirit of the Bill is that all financial institutions (“FIs”) will be obliged to identify tax residents of 75 jurisdictions and collect information on accounts held by them with effect from July 2017, and to submit the information collected to the Inland Revenue Department with effect from May next year.
Deputy President, under the Bill, the number of jurisdictions in respect of which FIs are required to collect tax residents’ information increases substantially to 75 from the existing two, namely Japan and the United Kingdom, representing a 37-fold increase. This is an onerous task for FIs. As a representative of the financial sector in the Legislative Council, I have, at the Bills Committee stage,
requested the Government to consider including the 73 newly added reportable jurisdictions in the list by phases, so as to minimize the burden on FIs.
But in reality, since OECD and the European Union have designated next year (2018) as the deadline for the first round of reporting, and any jurisdiction failing to comply with this requirement will be listed as a “non-cooperative tax jurisdiction”, there is indeed very little room for deferred implementation. That said, I surmise that FIs will encounter quite a number of manpower and systemic difficulties in actually observing the relevant statutory requirements. I hope that the Government can give FIs certain flexibility as long as the relevant statutory requirements are met.
Although Mr Kenneth LEUNG tried to explain the implications of the Bill in detail earlier on, I am still concerned that the implementation of the amended Inland Revenue Ordinance (“IRO”) will lead to conflicts between FIs and their clients. As I mentioned just now, currently Hong Kong FIs are only required to additionally collect information on accounts held by residents of Japan and the United Kingdom; one may say that the vast majority of Hong Kong people are completely unaware of the automatic exchange of account information with the tax authorities of other governments. onetheless, after the passage of the Bill, FIs will progressively advise their clients of this arrangement, and unnecessary misunderstanding may arise easily if their clients are not quite clear about the ins and outs of it. So today, I must reiterate that the Government should allocate a certain amount of resources to publicize the amended IRO, so as to minimize any unnecessary conflicts between FIs and their clients.
Lastly, I do hope that when the Government is to introduce international tax or related standards in future, it will strike a proper balance between different considerations, instead of simply acting with a “compliance mentality”.
Deputy President, I so submit.