Are Taiwan’s Days Counted as a “Tax Haven”? | Magazine content
As low-tax jurisdictions in Asia brace themselves for the introduction of common international reporting standards, Taiwan lags somewhat behind on this front, as companies there still openly portray the island as a paradise. tax.
This is something the local financial regulator seems keen and eager to prevent, but it is lagging behind its peers in many other countries to take action.
Most developed economies are part of a broad agreement on the automatic exchange of information relating to tax matters, which uses a common reporting standard (CRS) designed by the Organization for Economic Co-operation and Development.
Things picked up steam with the enactment in 2010 of a US law, the Foreign Account Tax Compliance Act (Fatca), which requires financial institutions in cooperating jurisdictions to file reports to the US government on their US clients.
Fifty-three jurisdictions, mainly European but also South Korean, start CRS exchanges in 2017. Next year, they will be joined from the Asia-Pacific region by Australia, Brunei, China, Hong Kong, Indonesia, Japan , Marshall Islands, Macao, Malaysia, Nauru, New Zealand, Singapore and Vanuatu.
In Hong Kong and Singapore, the region’s two largest low-tax jurisdictions, which used to advertise full confidentiality to overseas clients, preparations were quietly underway for the advent of CRS. .
“Unnoticed tax haven”
Taiwan, however, seems to have a little more to do.
Alex Cobham is Managing Director of the UK Tax Justice Network, which fights tax evasion and money laundering. In March, he was stunned to receive a sales email from a Taiwanese company called Yuan Chih, urging him to take advantage of the fact that Taiwan has yet to accept the CRS protocol.
Ophélie Wang, sales manager of Yuan Chih, said in an email, “Almost all countries will participate in this international reporting system in 2017 or 2018, but not Taiwan, so we can provide the customer with a nifty way to hide perfectly its assets in Taiwan. . “
Yuan Chih’s Facebook page features the capital’s Taipei 101 tower rising above the clouds, surrounded by stacked gold coins resembling skyscrapers. The caption reads: “The unnoticed tax haven”. Taiwan’s Financial Supervisory Commission (FSC) was clearly embarrassed when AsianInvestor mentioned the solicitation.
The watchdog said in writing, “It is totally inappropriate to attract foreign clients by claiming that Taiwan did not participate in CRS. The FSC supports the progress of anti-tax avoidance measures such as CRS, Fatca or other automatic tax information exchange systems. In the long term, participating in the CRS Tax Information Clearinghouse will help our banking industry to increase transparency, reputation and do business with sound operations.
Taiwan introduced its offshore banking units (OBUs) in 1983. The FSC said its goal was to help Taiwan compete with other financial centers by providing tax and foreign exchange benefits to offshore clients. “By attracting international capital to OBUs in Taiwan, it helps Taiwan gradually become a regional financial center. “
This is the official line. The reality is that OBUs are also used by the country’s citizens to dodge taxes, said a Taiwanese credit analyst and finance expert who asked not to be identified.
“They are disguised as foreign investors,” he noted. “They have shell companies in tax havens. They send money out of Taiwan and then back to Taiwan. They can make trade finance or invest in stocks. We understand that Taiwanese banks primarily serve this type of customer. “
In addition, offshore securities units, benefiting from generous tax breaks, were introduced in 2013. Offshore insurance units were added in 2015, as part of the goal of making Taiwan a hub of asset Management.
The government bristles at any suggestion that Taiwan’s flourishing offshore industry could be a boon to tax evaders or money launderers.
Official sensibility is not just the result of CRS ‘global march forward. Last August, the New York City Department of Financial Services fined Mega International Commercial Bank $ 180 million for violating anti-money laundering laws. The ruling said Mega Bank’s compliance program was “a hollow shell”.
Since then, the FSC has said it has tightened its anti-money laundering rules and oversight, including those that apply to Taiwan’s offshore industry.
Last December, Taiwan signed an agreement with the United States to implement Fatca. CRS is obviously a much more difficult call. The studies were numerous and the Ministry of Finance pointed out that a bill aimed at facilitating the automatic exchange of information had been received “positively” by the Taiwanese lawmakers on March 29.
Yet the dice have still not been cast and Taiwanese banks continue to tout the benefits of secrecy. Banque SinoPac, for example, assures us on its website that “OBU account information is strictly confidential”.
One of the possible reasons could be the delicate relations with China. An agreement on the exchange of tax information was signed in 2015 but has not been implemented. It is also limited to “on demand” exchanges and does not happen automatically.
“The Taiwanese government and industry want to sell offshore financial services to the mainland, where there is a common language, but their success is another matter,” the anonymous credit analyst noted.
“Mainland individuals are not very familiar with Taiwanese financial institutions. They hold AIA, HSBC or Prudential in high regard, but for Taiwanese banks and insurance companies, they won’t have as much familiarity and confidence.
The full version of this article appeared in the April / May issue of AsianInvestor magazine. Don’t miss the second of this two-part article, which will focus on developments related to tax transparency in Indonesia and Malaysia.