(Photo : The Tax Haven)

With a major tax agreement between China and other tax authorities entered into this week, Samoa's offshore industry faces an impending threat of dwindling revenues.

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The agreement implies that China is now part of the Multilateral Convention on Mutual Administrative Assistance in Matters, along with other 56 other member countries.

Based on the annual report of the Samoa International Finance Authority in 2011, it can be observed that Samoa's offshore industry earned around $13.5 million tala, which made up a large chunk of the country's total revenue of $20 million tala. And as China continues to tighten the noose around those engaged in tax evasion and corrupt activities, both at home and overseas, the number of new businesses can further decline. Specifically, the signing of the new agreement will afford China the necessary opportunity to see the tax details of 29 other countries. Therefore, if the precise details of Samoa's offshore industry had been held confidentially by law, this secrecy will gradually fade. A total of 27 countries have ratified the treaty.

 "This is significant, because China has been rather wary in the past of joining up with international initiatives on information exchange," claimed  John Christensen, Director of the Tax Justice Network (TJN).

Another implication of this agreement is that China may also acquire access to information held by Western countries, which may possibly encompass the huge data dump of 2.5 million files provided to tax authorities in the United States, United Kingdom and Australia. It is believed that these files may be more or less akin to those provided to the International Consortium of Investigative Journalists or ICIJ. The international organization had in particular, already let out a small chunk of the files it was provided with on a hard drive, even those ownership information of at least 120,000 offshore companies. The unfortunate thing for Samoa's offshore center is that more than 2000 companies have links with it.

Even though Samoa had been one of the first offshore financial centers to offer registration done in the Chinese language, Samoa has yet to sign bilateral tax agreements with China and other Asian countries. Currently, Samoa is only in agreement with the top western economies.