Hendren Global Group, China joins world anti-tax fraud endeavor

China joins world anti-tax fraud endeavor


Zhang Yuwei in New York (China Daily)-China is set to sign the tax-assistance convention with the Organization for Economic Cooperation and Development (OECD) on Tuesday and will become the last in the Group of 20 economies to enter the major global convention on tax.


On Tuesday, China’s tax head Wang Jun will sign the convention in Paris, which will be in force after three full calendar-months from its ratification. The convention — entitled Multilateral Convention on Mutual Administrative Assistance in Tax Matters – stipulates a structure for administrative collaboration between over 50 developing and developed nations in determining and collecting taxes, with emphasis on controlling tax evasion and avoidance.


China’s inclusion in the group ratifying the convention signifies the world’s second-largest economy participating “in international efforts to fight tax avoidance and evasion by coordinating with other countries in the assessment and collection of taxes”, according to OECD.


Upon the convention’s full enforcement with respect to China, the country’s tax officials will be allowed to request their counterparts from the participating nations for use of their tax records and vice versa.


Steven Zhang, managing director at Fund Tax Services LLC in New York, said China’s entrance to the group is “in keeping with a worldwide pattern”.


“China’s concurrence with the objectives of the convention would enhance the efficiency of Chinese tax officials in quelling potential tax avoidance and evasion by foreigners and foreign enterprises,” said Zhang.


Tax evasion was also a main concern set by world leaders, together with the leaders from the G20 economies, to tackle the causes of the 2008 financial catastrophe and to help eradicate corruption – one of the primary issues China’s new government has resolved to tackle with determination.


Tax evasion and avoidance will be one of the chief matters under consideration at the G20 summit in St. Petersburg on Sept 5-6.


“Governments all over the world are implementing laws and policies to enforce taxpayers to show greater transparency in their tax reporting and are increasing coordination in fighting tax avoidance over various jurisdictions,” said Zhang.


“Escalating pressure from nations and enforcers has put administration of international tax risk at the frontline of company and financial decisions,” he added.


Global Financial Integrity, a non-profit advocacy and research group based in Washington, said the Chinese economy bled $3.79 trillion in illegal investment outflows from 2000 through 2011. Out of about $2.83 trillion that drained unlawfully out of China from 2005 to 2011, they said, $595.8 billion ended up as bank deposits or financial assets – such as bonds, stocks, derivatives, and mutual funds -in tax shelters.


Statistics provided by China’s State Administration of Taxation last month revealed that anti-tax evasion moves by the Chinese government produced an additional income of about $5.7 billion last year, almost 30 times the figure of 2008.

The convention was developed jointly by the OECD and the Council of Europe in 1988. In 2009, the accord was rationalized to make it conform with international requirements on the transfer of information for tax purposes, and to allow nations that were not part of the OECD or the Council of Europe to join in.


Over 50 nations have either entered as signatories or have expressed their desire to do so since the revision of the convention.