The Hong Kong Government began the week with the signing of three separate Comprehensive Agreements for the Avoidance of Double Taxation (CDTA) with the Netherlands, Brunei and Indonesia. The signings, combined with negotiations currently being held with other nations, and the Government’s aim to have at least 12 signed agreements by the end of 2010, has prompted analysts to say that Hong Kong is attempting to equal its regional financial competitor Singapore.

On March 20rd John C Tsang, Hong Kong Financial Secretary, and Pehin Dato Abdul Rahman Ibrahim, Second Minister of Finance of Brunei, signed the first of the three CDTAs. The agreement was also the first for Hong Kong to implement the OECD standard on exchange of tax information. Key tax features within the agreement include lowered withholding rates and legislative changes which see airline and shipping profits arising in Brunei being taxed in Hong Kong. On March 22nd the second CDTA agreement was signed between Hong Kong and its fourth biggest trading partner the Netherlands. The third CDTA is expected to be signed on March 23rd by representatives of Hong Kong and Indonesia. Ongoing negotiations are currently being held with several nations including France, Austria and Switzerland, which if successful promise to fulfill Hong Kong’s goal of 12 signed agreements by 2011.

The rapid increase in tax agreements signed or negotiated by Hong Kong have led several economic analysts to compare the country to Singapore in its aim to attain comparable image. Currently, Singapore holds the 12 tax information exchange agreements, as required by the OECD’s transparency standards. With Hong Kong’s expanding private banking and financial sector, the Government is taking prudential steps to remain competitive with Singapore by applying adequate tax transparency measures and distancing itself from a tax haven image. Commenting on the new and upcoming CDTAs K C Chan, Hong Kong Secretary for Financial Services and the Treasury, said:” …it serves as the strongest rebuttal against any negative perception to compare Hong Kong with a tax haven. It also demonstrates our staunch support for international efforts in enhancing tax transparency while at the same time providing sufficient safeguards to protect taxpayers’ privacy and confidentiality of information exchanged.”

Photo by hugolim.com

Following a meeting of the Austrian Council of Ministers, the Austrian government has voiced its full support of creating a financial transaction tax system spanning the entirety of Europe. The idea was floated to the Austrian government in a paper written by Josef Pröll, Austrian Finance Minister. The aim of the financial transaction tax would be to rein in speculation on the financial markets and create a more stable currency markets. As set forth by Josef Pröll, the transaction tax could generate €2 billion in Austria alone.

This is not the first time that the Austrian government has greeted the idea of a transaction tax, having received unanimous support for it when raised earlier this year in April. Further, the United Kingdom saw similar sentiment voiced recently when Lord Adair Turner, Chairman of Britain’s Financial Services Authority proposed the same idea. The thought of a financial transaction tax has also been popular in France for a number of years, having first been raised in 2001 and once again this year, in late May.

No specific mention was made in regards to what will happen to the gains from any introduced financial transaction tax in Austria. Although, G20 finance ministers did meet on the 5th of September to discuss the options regarding the implementation of a worldwide transaction tax, the earnings from which would be used in the aid of anti-poverty campaigns.