Hong Kong backs US-led global effort to ‘combat tax evasion’, with mainland China also on board

Both Hong Kong and mainland China have backed the United States-led initiative to implement a global minimum tax rate, with the city’s financial secretary supporting efforts by the international community to “combat tax evasion”.

Mainland China, as well as its special administrative regions of Hong Kong and Macau, are among the 130 economies that have signed on to the “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy”, which proposes a 15 per cent tax floor and a revenue threshold of €750 million (US$891 million) for multinational companies, with only the shipping industry exempted.

In response to the plan that outlines a sweeping overhaul to the century-old global tax system, Hong Kong Financial Secretary Paul Chan said: “As an international financial and commercial centre, Hong Kong has all along supported international efforts to enhance tax transparency and combat tax evasion, and has adopted corresponding measures.”

The Paris-based Organisation for Economic Cooperation and Development (OECD), which has been leading the international negotiations, announced the tax plan after two days of talks this week. Those 130 economies represent more than 90 per cent of global gross domestic product, and the plan could yield around US$150 billion in additional global tax revenue.

“China supports global tax cooperation, as well as reaching a consensus on a comprehensive and more inclusive scheme,” foreign ministry spokesman Wang Wenbin said at a briefing on Friday. “We would like to join [the global minimum tax initiative] to support multilateralism and inject new momentum into the global economic recovery.”

However, Wang also called for the interests of developing countries to be taken into consideration during negotiations.