China Joins International Financial Data Exchange to Take on Tax Evasion
(Yicai Global) Sept. 5 — China’s tax authority will begin sharing residents’ financial investment data with around 100 countries this month in a bid to crack down on tax evasion.
The State Administration of Taxation will begin exchanging data to learn more about what Chinese citizens are doing with their money overseas, it said in a statement online. The move comes as part of the Common Reporting Standard, an international agreement covering tax information sharing which is backed by the Organization for Economic Cooperation and Development.
China pledged to bring in CRS at the G20 Meeting of Finance Ministers and Central Bank Governors in September 2014 with support from the State Council, China’s cabinet. It vowed at the time to start following the standards as of September this year. By sharing information about its own residents, China can gather data on income undisclosed by its citizens with overseas assets and incomes.
The OECD said in July that September would see more than 100 jurisdictions sharing tax data via 3,200 bilateral exchange relationships — 500 more agreements than there were in April this year. Hong Kong, where mainland residents often purchase life insurance, is one of those jurisdictions, Beijing Youth Daily reported. If premiums reach a certain level, the special administrative region will need to disclose the policy to mainland authorities, helping them learn more about high-net-worth individuals and their insurance policies.
Some Chinese citizens also set up foreign shell companies to conduct investments and create family trusts overseas, the report added. Popular countries for doing so include Singapore, Hong Kong, New Zealand, the Cayman, Virgin and Cook Islands, and Guernsey — all of which have agreed to share data through the CRS.