tax issues in asean integration: an observation - stephen phua.pdf · 2016. 7. 25. · asean member...
TRANSCRIPT
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TAX ISSUES INASEAN INTEGRATION:AN OBSERVATION
By:Assoc Prof Stephen PhuaFaculty of LawNational University of Singapore
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Contents
1. History and Profile of ASEAN2. ASEAN Economic Integration:
Towards a single market3. ASEAN and the world: FTAs and
DTAs4.Future “AEC 2015”: Milestones
and Pitfalls
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History and Profile of ASEAN
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The ASEAN Way• Origins can be traced back to the signing of the
Treaty of Amity and Cooperation in SEA in 1976• “An evolutionary approach, relying largely on
patient consensus-building to arrive at informalunderstandings”
• Key features▫ The consensus method of decision-making▫ Preference for informality and loose arrangements▫ Institutions follow substance
• Guiding principle: “a pace comfortable to all”
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ASEAN Key Statistics 2009• Land Area: 4.44 m sq. km• Population: 590 m• GDP: US$1.5 tn• GDP per capita: US$2500• GDP growth: 1.5%• Inbound FDI: US$39 bn• Total trade to GDP: 100%• Intra-ASEAN trade: 24% of total trade• Top Trading partners: China, EU, Japan, USA
Source: ASEANstats 15Jul 2010
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2. ASEAN Economic IntegrationFree Flow of Goods and Serviceswithin ASEAN
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Pre-AFTA
• First attempts at Economic Cooperation▫ Cooperative establishment of large-scale
industrial projects in ASEAN countries▫ Intra-ASEAN Preferential Trading Arrangements
• Rested on two pillars▫ 1) Preferential trading arrangements▫ 2) Industrial complementation
• Conflicts of national interests resulted in pooroutcomes
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The ASEAN Free Trade Area• Change in focus: Regional Integration.▫ Trade and investment decisions determined by
private entities on the basis of marketconsiderations▫ Government agreements limited to making trade
and investment freer and easier.• Main thrusts▫ Lower tariffs: the CEPT Scheme▫ Remove non-Tariff barriers
• Big step forward for economic regionalization
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The ASEAN Economic Community (AEC)
• In order to push on to the next stage of ASEANeconomic integration, the AEC was born.
• Key additions▫ The liberalization of trade in services;▫ The ASEAN Investment Area;▫ Accelerated regional integration in the designated
priority sectors; and▫ The easier movement of “business people, skilled
labor and talents”.
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Free Flow of Goods• Achievements▫ Tariff reduction All tariffs for products in the CEPT Inclusion Lists of
ASEAN-6 have been eliminated for intra-ASEANtrade as of 2010
▫ Simplification of the CEPT-ROO e.g. Alternative origin criteria to the 40% Regional
Value Content rule; back-to-back CO arrangements▫ The AHTN (8 digit TN based on HS code of WCO) Simplification and, more importantly,
harmonization of tariff nomenclature within ASEAN
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Free Flow of Goods
• Challenge 1 – Non-Tariff Barriers (NTBs)▫ What has been done The ASEAN Trade Facilitation Framework and its
Work Programme The ASEAN Policy on Standards and Conformance The ASEAN GRP Guide▫ The same approach saw limited success in EU The EU has the SPS and TBT Agreements Nevertheless, EU member states have erected huge
technical barriers to trade
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Free Flow of Goods• Challenge 2 – The ASEAN Single Window Project▫ Gist of the ASW: a centrallized web portal for
electronic processing of trade documents at thenational and regional levels▫ Implementation Issue identified: the integration
of member state NSWs may be problematic Under the ASW Plan, member states must first
operationalize their NSWs However, the inter-communicability of these different
NSWs utilized by various member states may be difficult▫ Suggestion: standardization of the NSW solution
platforms first, to avoid future integration problems.
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Free Flow of Services
• In stark contrast to the flow of goods, theliberalization of the services sector has beendifficult
• Three reasons▫ 1) Services, unlike goods, are nebulous products▫ 2) Services account for a significant proportion of
some member state economies▫ 3) No clear industrial policy for the services sector
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3. ASEAN and the world
FREE TRADE AGREEMENTS
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ASEAN-Plus FTAs Signed
• 5 have been signed to date▫ ASEAN-China (2002)▫ ASEAN-India (2003)▫ ASEAN-Japan (2003)▫ ASEAN-Korea (2005)▫ ASEAN-Australia & NZ (2009)
• 2 other ASEAN’s major trading partners are theUS and the EU
• Account for 20% of total ASEAN trade
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ASEAN-USA FTA: Progress Made
• US is the 4th largest trading partner of ASEAN• Milestones▫ Oct 2009: Draft resolution introduced to US
Senate Foreign Relations Committee▫ Nov 2009: 1st ASEAN-US Summit in Singapore Discussions centered on the ASEAN-US FTA▫ Sep 2009: 2nd ASEAN-US Summit in New York Focus was more on the recovery of the US economy
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ASEAN-EU FTA: Discussions Stalled
• Talks launched in May 2007• Discussion halted in 2009 because of EU
concerns over Human Rights violations by someASEAN member states
• Recommendations▫ Fast-track process to speed up talks▫ Transitional provision, to provide different
timelines for ASEAN member states to who arenot yet up to the mark in terms of Human Rights
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3. ASEAN and the world
DOUBLE TAXATIONAGREEMENTS
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Distortions by taxes
• Tax can liberate or frustrate efficient movementof capital and impede trade linkages
• Differing goals of national tax policy and rules• AEC Blueprint aims to have complete DTA
network by 2010• Constraints in DTA
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ASEAN Treaty Network CoverageYear Signed and Year EffectiveBrun Indo Mal Phil Sing Thai Camb LPDR Myan Viet
Brun2000
(2003)2009
(2011)-
2005(2007)
(ID) -2006(NIF)
-2007
(2010)
Indo1991
(1987)1993
(1994)1990
(1992)2001
(2004)- -
2003(NIF)
1997(2000)
Mal1982
(1984)2004
(2007)1982
(1983)- -
1998(2009)
1995(1997)
Phil1977
(1977)1982
(1983)- - -
2001(2004)
Sing1975
(1976)- -
1999(2010)
1994(1993)
Thai -1997
(1998)2002(NIF)
1992(1993)
Camb- - -
LPDR2009(NIF)
1996(NIF)
Myan2000
(2004)Source: IBFD
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ASEAN Member State TreatyWithholding Rates
State
Lowest Treaty W/H Rate (ASEANMembers)
(%)
W/H Tax Rate(%)
Lowest Treaty W/H Rate(Non-ASEAN Members)
(%)Div. Int. Roy. Div. Int. Roy. Div. Int. Roy.
Brun 10Viet
10/51
Sing10
Viet0 Coy: 20
Ind: 0Coy: 10Ind: 0
0UK
10Japan
0UK
Indo 15/102
Sing10
Sing15
Sing20 20 20 10
China5
Kuwait5
UAEMal 0
Indo10
Sing8
Sing0 15 10 0
Kuwait0
Kuwait03
NorwayPhil 15/102
Viet15/104
Thai25/155
IndoCoy: 30/15
Ind:25/20
Coy: 30/20Ind: 25/20
Coy: 30Ind: 25/20/10
15/102
Bahrain10
UAE10
UAE
Sing 10/52
Myan10/51
Brun8
Mal0 15 10 0
Cyprus0
Mauritius0
NetherThai 15
LPDR15/10Viet
15Mal
10 15 15 10Oman
-/10/06
Italy15/5/07
FranceCamb - - - 14 14 14 - - -LPDR 15
Thai15/101
Thai15
Thai10 10 5 5
China5
China5
ChinaMyan 10/52
Sing10/81
Sing10
Viet0 15 20 0
UK10
Korea (PR)08
UK
Viet 10Mal
10Sing
15/59
Sing0 10 Coy: 10
Ind: 510/52
Ireland10
Russia10/710
HK
Source: International Bureau for Fiscal Documentation
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5. Working towards “AEC 2015”
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Milestones of Progress
1. Enhanced regional trade integration (1992)2. Lessons from the 1997 Asian Financial Crisis3. The signing of the ASEAN-China FTA (2002)4. Elimination and massive reduction in intra-
ASEAN tariffs (from 2005-2010)5. Effects of 2008 Global Financial Crisis on FDI6. Nego with US (4th largest partner) (2009)
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Conclusion: Future Challenges• ASEAN Way ++• Current lack of Follow Through
“Regional economic integration seems to have becomestuck in framework agreements, work programmesand master plans”
• Trade liberalisation is precursor to FDIs• FDI promotes econ growth• Growth sustainable if distortions removed• Structural constraints to enhance tax integration• 100% DTA network• Capital importers reduce source taxation• Capital exporters enhance relief