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In reply to a recent question in the Legislative Council, Secretary for Financial Services and the Treasury, Professor K C Chan, confirmed that Hong Kong's Inland Revenue Department (IRD) has no imminent plans to change its current practices with regard to base erosion and profit shifting (BEPS) and transfer pricing.
His questioner had reminded Chan that, in July 2013, the Organization for Economic Co-operation and Development (OECD) launched a BEPS Action Plan, identifying 15 specific actions needed to tackle tax planning in respect of profits being shifted to locations where there is little or no real activity but the taxes are low.
Chan confirmed that, as the Action Plan has been endorsed by the Finance Ministers of the Group of Twenty (G20), as well as the G20 heads of state, the Hong Kong Government has been closely monitoring the latest developments, and that it will embark on studies and engage local stakeholders for appropriate follow-up actions in due course.
He noted, however, that IRD's current methodologies and practices adopted for dealing with transfer pricing issues follow the guiding principles provided in the OECD Transfer Pricing Guidelines, and that the regime has been operating well since implementation in 2009.
IRD, he confirmed, has therefore no plan at this juncture to change the current practices, but it will closely monitor international development in this respect, including OECD's discussions, with a view to assessing the need for introducing corresponding measures and consulting local stakeholders in due course.
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