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China Joins JITSIC
Recently, China joined the Joint International Tax Shelter Information Centre - JITSIC which was established in 2004. Now, JITSIC has seven formal members - Australia, Canada, Japan, United Kingdom, United States, Korea and China and two observer members - France and Germany. Taxand China examines the purpose of China joining the JITSIC and the benefits that this represents for China in terms of the increased exchange of information with its trade partners.
JITSIC was established to supplement the ongoing work of tax administrations in identifying and curbing abusive tax avoidance transactions, arrangements, and schemes ("abusive tax schemes").
The purpose of JITSIC is to:
- Provide support to the member countries in identification of abusive tax schemes and those who promote them
- Share expertise, best practices and experience in tax administration to combat abusive tax schemes
- Exchange information on abusive tax schemes in accordance with the provisions of bilateral tax conventions and
- Enable the member countries to better address abusive tax schemes promoted by firms and individuals.
Through information exchange and knowledge sharing, members of JITSIC will :
- Increase public awareness of the potential civil and criminal risks of promoting and investing in abusive tax schemes
- Share best practice among the parties' tax administrations for identifying and addressing abusive tax schemes
- Enhance each party's compliance and enforcement efforts through coordinated and "real time" exchanges of tax information consistent with the provisions of bilateral tax conventions
- Formulate effective procedures for early identification of promoters and investors involved in abusive tax schemes
- Identify emerging trends and patterns which can help in anticipating new abusive tax schemes likely to be followed in future
- Improve parties' knowledge of techniques used to promote abusive tax schemes across borders.
China has already sent its tax expert to the JITSIC London office with the objective of gathering knowledge of their procedure and practice in detail. It will be further involved in various cooperative measures with other parties of JITSIC. The Chinese tax authorities will have easy access to the international information and resources which will help them identify abusive tax schemes such as indirect transfer of Chinese Investment Equity more frequently. Given this year's trend towards increased tax collections in China, multinationals should start actively reviewing their cross-border tax optimisation systems, especially if they have presence in other JITSIC member countries.
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