PETALING JAYA: Malaysia and three other countries, which had been blacklisted by the Organisation for Economic Cooperation and Development (OECD), are now off the list after they agreed to adopt the OECD’s regulations.
Last week, G20 leaders meeting in London cited Malaysia, the Philippines, Uruguay and Costa Rica as uncooperative tax havens, based on an OECD list.
These four countries are now in the category of jurisdictions that have committed to the internationally agreed tax standard but which have yet to substantially implement it.
OECD secretary-general Angel Gurria told reporters in Paris yesterday that the four jurisdictions have now made a full commitment to exchange information to the organisation’s standards.
According to Deloitte Malaysia associate director Tan Hooi Beng, the swift action taken by the Government to rectify the country’s status showed its commitment to cooperate in the fight against tax abuse.
He said in an e-mail reply to StarBiz that the country was also proposing legislation this year to remove impediments to the implementation of the required international tax standard.
Tan said even before the OECD’s progress report of April 2, there was already a proposal to update financial regulations in Labuan in order to meet OECD requirements.
He added that the proposal was now awaiting parliamentary approval.
Tan had, in an earlier report, said Malaysia already had double taxation agreements (DTAs) modelled closely on OECD requirements with 69 different jurisdictions.
Labuan, although governed by separate company and tax legislations, has been able to rely on the DTAs as part of Malaysia although to-date several countries, including Australia, Japan, Britain and the Netherlands, have excluded Labuan from the DTA.
“It is also noteworthy that the Cayman Islands has enacted legislation that allows it to exchange information unilaterally and has identified 12 countries with which it is prepared to do so,” Tan said, adding that this legislation was being reviewed by the OECD.
Commenting on the OECD move, Ernst & Young Tax Consultants Sdn Bhd partner Lee Hock Khoon said with this new development, the Government would be reviewing relevant banking laws, including the ones impeding the free exchange of information.
“This may include laws to obligate banks to make due enquiries and disclose specific information on accounts, and remove any penal provisions imposed on the disclosure of such information,” he said.
However, Lee added that such changes should not go to the extent of allowing “fishing expeditions,” such as general enquiries made in the hope of identifying ways to evade tax.