The Straits Times report that:
SINGAPORE is not a tax haven even as the Government cuts the corporate tax rate to 17 per cent this year.
The Republic has low but not no tax; strong rule of law; companies with substantive business activities, and it is now considering adopting an internationally-recognised standard for the exchange of tax information, said Senior Minister of State for Finance and Transport Lim Hwee Hua in Parliament on Tuesday.
She was responding to a question from MP Inderjit Singh (Ang Mo Kio GRC) that lowering the corporate tax rate would increase the perception of Singapore as a tax haven.
Let's be clear: the tax rate in a territorial system of tax is not the issue: any country can set a tax rate of its choosing in my opinion so long as it does not abuse the right of other nations. The fact is though that Singapore does abuse the rights of other nations with regard to tax. It is a secrecy jurisdiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Singapore is replacing Switzerland as the secrecy jurisdiction of choice for this with wealth, and until it shows willing to join the EU STD, for example, it will remain under suspicion.
And no minister's bluster will make any difference.
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There are many other reasons apart than fraud that allow individuals to benefit from banking secrecy.
Many countries, including the UK, have media outlets that publish rich lists and expose the personal wealth of many without the need for their permission.
This information being in the public domain can potentially put individuals at a higher security risk. Wealth can bring as many problems as it does benefits… and an extremely secure banking confidentiality code can help curb these risks.
I appreciate that some corrupt individuals may take advantage of the system but it should not be assumed that the secrecy law is in place solely to benefit criminals.
Maybe there should be an addition to the uk/eu tax regulation – that kicks in when you reach a certain level of wealth. The wealthy would maybe have to be prepared for a tax investigation every 3-5 years.
This would enable the wealthy to enjoy the benefits of banking secrecy whilst complying with forensic tax teams (which are also protected by uk tax secrecy laws). I doubt it would be to invasive for individuals as it could all go through advisors.
Richard
I think both Hong Kong and Singapore operate the same system (circa 15% to 17% corporate tax rate but only on profits generated locally and on overseas profits remitted to the territory). It is therefore possible for a non-resident to trade or invest through a Singaporean or Hong Kong company and pay no tax at all if operated carefully. Are you saying that you are OK with that, provided that it is not backed up by secrecy laws ? I cannot recall whether companies in those jurisdictions are required to file accounts on public record or not.
Andy
Let’s be clear what we are talking about here. I am not arguing that any individual needs have their records based on the public record. I do not think that appropriate.
I am arguing that every tax authority should be willing, automatically, to exchange information on income earned within their domain by individuals resident in the domain of another tax authority unless that other tax authority has shown itself to willingly abuse the information that it receives ( which I accept is a necessary protection).
I am also arguing that any individual who uses a structure created under statute law, whether it be a corporation, partnership with limited liability or trust should have information with regard to that entity put on public record so that those who deal with it are aware of the nature and extent of the risk that they face when dealing with it.
as a consequence, there is no reason for anyone to have information on public record unless they choose to avail themselves of the protection provided by the state, or the opportunities for planning the state provides. I think that entirely reasonable. It is a choice in their party use these structures: the consequence is data being made available to protect third parties.
Richard
Rupert
I do not think I can impose a tax system on countries. I can expect countries to automatically exchange information.
I can expect that to be done on the basis of the revised EU savings tax directive, and do.
I can expect information on the beneficial ownership, management and training of all entities created in law (companies, limited partnerships and trusts) to be placed on public record
If this is matched with automatic information exchange then I have no problem with the situation that you outline: details of the beneficial ownership of the income will in that case arise with the tax authorities who may have the rights to assess it. It is proven that when people know that their income will be declared to the tax authority with that right the rate of compliance increases from around 50% to well over 90%
That is my objective
Richard
That seems fair enough when we are talking about the UK & EU I guess.
But the majority of the money flowing into Singapore is from wealthy Asian citizens and “new money” wealth created in the East.
Those jurisdictions seem to have very different views on censorship/disclosures that the West is used to….. and there have been many reports of corruption and misuse of authority. Nobody can really be sure what goes on in detail and therefore the integrity of officials is questionable.
Singaporean banks…….rather than helping to facilitate organised crime……. may provide a system that prevents innocent individuals from becoming victims of underground groups by protecting information about their wealth.
So the strict secrecy regime of Singaporean banking probably ultimately prosper….and I doubt that will change with pressure from the UK.
Ultimately I think it is unfair to suggest the system was set up to facilitate tax evasion.
By the way… I know Switzerland has a strange view that tax evasion isnt a crime………. what is singapore’s view?
Richard
For what its worth I think you will get your wishes 1 and 2 although of course it doesn’t apply to Singapore and Hong Kong and they aren’t going to sign up for it.
I don’t think you will get 3 for at least 10 years, if indeed at all. I know your arguments for it, but I think there will be widespread resistance to it, including and particularly from those very same countries who are driving the exchange of information and extension of the EUSTD initiatives. Human rights will block it.
My original question was more about the EU Code of Conduct’s attitude to territorial tax systems. Do you know if they have a view on it ?
Andy
Respectfully, I think your argument is absurd.
You will know that I say that if there is proven abuse with in a tax regime information should not be provided to it. I can live with that. But to argue that Singapore, which blatantly supports tax evasion by refusing to exchange information with those tax authorities who have legitimate concern about their citizens taking advantage of its banking secrecy rules, is as a consequence providing a service to the world is as good an argument as saying that street dealers in drugs are providing a service as useful as a doctor.
sorry, but when the state are deliberately constructs a system of secrecy for the benefit of those resident outside it, which is designed to undermine the taxation regulation of another place, then it is responsible for the occasion that follows from it. Whether Singapore did that deliberately or not does not matter: it is obvious that this abuse follows from the structure that has in place and as such it has a responsibility to tackle it.
If it does not, I for one would very strongly support economic sanctions against it.
Richard
Rupert
Tax evasion is not a human right.
There is no human right to use limited liability.
That is why I think we will secure these changes.
As far as I know the EU code of conduct is relaxed on territorial tax systems. They are not seen as abusive
Richard
Richard you seems to be single-minded when it comes to this issue….. making the assumption that the intention/consequence of the singaporean system significantly facilitates tax evasion.
There are many instances in the world where a system can inadvertantly facilitate criminality…. but who does the responsibility lie with?
Safe deposit boxes are used worldwide to store valuables (and many use it to hide goods)….. should that business be shut down? Would a car manufacturer be held accountable if one of their models was used a getaway car?
If someone abuses a system… they as individuals should be held accountable…. not the system itself. By cowtowing to a little pressure, the regulators would compromise their whole operation… for what is probably minimal abuse.
Richard
Interesting re. territorial tax systems.
Tax evasion is certainly not a human right, but privacy is. The vast majority of people are not tax evaders and so their right to privacy is not being questioned. Whether or not the right to use limited liability structures is a human right, there must surely be a human right not to have an individual’s name associated to a particular corporateb vehicle. In other words the corporate vehicle has no human rights, but the beneficial owner’s right not to be listed as the owner of that corporate vehicle must surely exist. This won’t come in onshore, and if it doesn’t come in onshore then I don’t believe it will come in offshore. I think once it comes in onshore then that’s a different matter and offshore will have to follow. But I just don’t see the Germans or the French or the Italians, let alone the British or the Americans, agreeing to it.
Andy
You appear to be deliberately missing the point. Note that I had to find a secrecy jurisdiction is a place that deliberately creates legislation designed to undermine that of other states. That is not the same as a car manufacturer whose product is used as a getaway car. They did not design it for that purpose. Please do not confuse issues by making completely false claims.
And yes, safe deposit boxes should also be banned If their contents have not been recorded on the banks system for exchange with those making enquiry from a legitimate authority.
Richard
From Singapore’s perspective –
The East is growing at a faster rate than the rest and investors will want to benefit from this growth. Singapore, being a major financial hub is well positioned to benefit from this inward investment.
However, there are competitors in the world.. namely Switzerland. For reasons of competance, but also of glamour, Switzerland is the world’s largest private wealth manager. Singapore has to compete with this if it is to attract private wealth.
Therefore it has adopted a supposedly superior system to Switzerland to play on the mind of the rich and piggyback on the image of Swiss stability in wealth management.
The Swiss, by adopting any EU tax scheme, (although commendable) has demonstrated weakness and untimately damaged its unique marketability as an inpermeable jurisdiction. The tax is irrelevant… most people will be happy to pay…. but it shows the system can be interfered with.
Taking advantage of this, Singapore will have a stricter regime for the time being and be ‘the Switzerland of the East’. This will attract foreign deposits (whether declared or not) and allow Singapore to demonstrate its competance in this field. It may possibly, over time, become the top wealth manager.
This provides wealthy investors with a secure safe environment to deposit money, while investing in the fairly unsecure high growth economies of Asia.
Ultimately I am sure this will attract tax evaders, just as Switzerland did. But the amount of undeclared deposits in Switzerland is surely only a tiny fracion of the trillions under management they boast.
Singapore will use this supposedly ‘better than switzerland’ notion for the time being and attempt to steal their crown.
Eventually, after enough private wealth has been attracted to the region and when singapore has proven its competance in the arena….. it may agree to impose foreign tax agreements.
The main losers will ultimately be Switzerland if it proves successful. Any occurance tax evasion will only be a small smudge on Singapore’s conscience if it can achieve all of this.
Tax Research LLP,
you need to ignore Andy. The kind of fallacy argument is the same pattern used by the Singapore government. That is to market a policy or law in such as way that good for the country where in fact its purpose are generally conceived or rather understood to have political side agenda and interest.
For example, the rule to prevent investigation of government official by private investigator,
and enlargement of power of police to arrest anyone suspect of breaking of law when the activities are even not committed yet and caught red-hand
Still people in Singapore will know why these rules are passed in the first place.
If Andy’s posting number 12 above is truly representative of the official Singapore view then its mind-boggling. It may succeed for about 2 years and then Singapore will be completely ostracised. Is Singapore blind to the pressures being applied to Switzerland, and with good reason, and to which Switzerland clearly has no option to cave in ?
Maybe over the next 2 years the approach will be to let Singapore draw in all the undeclared wealth from Switzerland, Liechtenstein and elsewhere, and then once its all contained in Singapore it would be very easy to completely isolate that wealth by making it a criminal offence to have a correspondent bank relationship with Singapore. No ability for Singapore banks to hold or trade in Dollars, Euros, Sterling, Yen etc. Probably a lot easier to do that with Singapore than it is with Switzerland after all these years.
For those of us in the offshore world who do things properly and respect the difference between proper tax planning and criminal tax evasion, attitudes like Singapore’s are very hard to accept. I know that the international press is often embargoed in Singapore but surely Singapore is not oblivious to the fact that the world is changing ?
Seems like an extremely short-sighted policy to build an offshore private banking industry in 2009 on tax evasion and other criminal money.
Rupter
For once we are in agreement
Singapore is setting itself up to be picked off by sanctions
Dubai and Panama are others who may be heading that way
Richard
Richard
Not so sure about Dubai or Panama.
Dubai is of course part of the UAE which owns 9% of the world’s oil reserves and plays a significant role on OPEC. I can’t see anybody being willing to impose sanctions on any Gulf state in respect of financial services.
Panama at the moment seems to be able to play the commercial card of not allowing contractors from certain countries to tender for the very lucrative contract for the widening of the Panama Canal if they get put on blacklists.
Neither Singapore nor Switzerland can play those sorts of cards though…
Rupert
Good points
Richard
I was wondering if anyone out there had some info for me. I was employed in Singapore with a consulting company. My position was marketing director, I received my employment pass and everything seemed above board, I took on 10,000 shares of the company as well. After six months, I never received a salary so I decided to cut my losses and leave. Recently I received emails from the company’s auditors saying they had unpaid bills, plus the company had not yet done the annual return. It’s been 12 months since I had anything to do with the company and now I am being told that because I was a principle officer of the company I am now liable for a SG$ 5000 fine and could be prosecuted. I am not sure how to get out of this mess.
Singapore has now of course “seen the light” and will sign all the DTAs it can in order to get off the OECD grey list.
Richard – I find your perspective on all this – and throughout your work in this field – terribly one sided, but that is of course the role and function of your organisation, and at least you are able to stimulate a debate.
The obsession you have with the naughty secrecy jurisdictions tends I think to let the major countries off the hook – there are all manner of odd practices in OECD countries – look no further than Delaware in the good old US of A for example.
The emphasis of the major economies should not be to look to the bogey men in the OFCs but to themselves. Lax regulation, excessive military expenditure and poor governance are by far the biggest influences on tax rates.
Rainer
I think you’ll find that your problem is that you were a Director of the Company and technically liable for its defaults. Your best policy is to write to the MAS and explain your position. Try and get as high up the organisation as you can, as the higher you go, the more discretion and experience they are likely to have