Macau, while not a major financial center, is considered an offshore center and its tax rates are among the lowest in South East Asia. Twenty-eight banks are authorized to operate in Macau, according to the latest available data, of which 17 are branches of foreign banks including banks from Mainland China, Portugal, the Hong Kong, Taiwan, the USA, the UK and Singapore.
One reason that Macau can sustain such low tax rates is that much of the region income is derived from gambling revenue. The region gross revenue from gambling totaled MOP267.87bn (USD33.48bn) in 2011; a staggering 42 percent increase from 2010, with taxes on gambling accounting for over 80 percent of administration revenue and 30 percent of GDP.
Macau has a tourism based economy with almost 25 million inbound tourists in 2011, of which 53 percent came from Mainland China, 30 percent from Hong Kong and 1 percent from India. Of these visitors, 10 percent listed gambling as their purposes of visit and 65 percent listed vacation.
A testament to its increasing prominence, Macau signed a slew of DTAs and TIEAs last year and ratified TIEA with Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden. Also in 2011, Information exchange provisions were added to China DTA with Macau, which entered into force on January 1 on this year.
A rapidly developing nation with an ever growing number of high net worth individuals, India is becoming increasingly interested in signing international tax agreements. There were 62,000 ultra wealthy households in India in the 2010/2011 and this number is expected to almost quadruple to 219,000 by 2015/2016, according to a 2011 report by Kotak Wealth Management and CRISIL Research.
The day after the treaty with Macau was announced, India signed the OECDs Convention on Mutual Administrative Assistance in Tax Matters which provides for administrative co-operation between the parties in the assessment and collection of taxes, with a view to combating tax avoidance and evasion. Thirty two parties including the USA, UK, Canada, France, Germany, Korea and Japan have signed the convention.
In total India has signed 81 DTAs and 6 TIEAs according to OECD reports, which do not include recently signed agreements such as that with Macau. The country signed six agreements in 2011, with several major offshore centers including the British Virgin Islands, Cayman Islands, Jersey and Guernsey.
Speaking about the recent agreement with Macau in the Hindu Business Line, a senior Finance Ministry official reinforced the country growing commitment to international tax enforcement saying the pact would pave the way for India to get banking information from Macau for tax administration purposes.
