Singapore will introduce new legislation that will make it harder for foreigners to evade taxes back home by hiding their money in bank accounts in the city state. Singapore will “assist (other countries) on bona fide requests for information”, the Finance Ministry announced on Friday.
The announcement came three days after the Obama administration backed a bill to crack down on tax evaders.
Singapore, Hong Kong and Switzerland are among 34 countries listed in the Stop Tax Haven Abuse Act, which threatens financial sanctions against “foreign jurisdictions, financial institutions, and others that impede U.S. tax enforcement”.
President Obama was one of the three senators who co-sponsored the bill, which is now being moved forward by Senator Carl Levin of Michigan.
Washington is coming down hard on tax fraud as evident from its legal battle against UBS. The Swiss bank agreed to pay $780 million in fines and hand over to US authorities account details of around 300 clients to settle criminal charges.
Singapore has been following the case as GIC invested 11 billion Swiss francs in UBS in December 2007.
Minister Mentor Lee Kuan Yew recently told bankers that Singapore could not escape the pressure being applied to Switzerland. "We must move with the flow," he said, according to the Financial Times.
The Finance Ministry said the law will be amended in the middle of this year to “endorse” the standard adopted by the Organization for Economic Cooperation and Development, which includes America and Britain.
The ministry said: "Once the legislative amendments are passed in parliament, Singapore is prepared to negotiate and conclude double taxation agreements that will enable us to provide further assistance for exchange of information."
It added: "The decision is in keeping with Singapore's role as a trusted centre for finance and a responsible jurisdiction, with strong and consistent regulatory policies and a firm commitment to the rule of law. The Standard is consistent with Singapore's system of banking confidentiality, which does not shelter criminals.”
The changes will allow foreign tax authorities to request information about suspected tax evaders, says the Financial Times.
Singapore’s strict bank secrecy laws turned it into the “Switzerland for Asia’s wealthy”, the International Herald Tribune reported in 2007, claiming:
“Concerns have emerged, however, that Singapore may also be attracting wealthy individuals who have something to hide.”
The Wall Street Journal reported in 2006:
In 2001, Singapore stiffened laws against breaching the confidentiality of bank customers, making penalties for violators even tougher than in Switzerland.
See the Banking Act protecting information about bank accounts and account holders, which can be disclosed only on certain conditions and is rarely allowed to leave the country. The penalty for violating the law is a fine of up to 125,000 Singapore dollars (about $80,000) and/or up to three years’ jail.
To avoid double taxation, the OECD Model Tax Convention says an individual
a) Shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);
b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed
to be a resident only of the State in which he has an habitual abode;
c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;
d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
Here’s the list of countries targeted by the US Stop Tax Haven Abuse Act:
| Anguilla | Cook Islands | Jersey | St Kitts and Nevis |
| Antigua and Barbuda | Costa Rica | Latvia | St Lucia |
| Aruba | Cyprus | Leichtenstein | St Vincent and the Grenadines |
| Bahamas | Dominica | Luxembourg | Singapore |
| Barbados | Gibraltar | Malta | Switzerland |
| Belize | Grenada | Nauru | Turks and Caicos |
| Bermuda | Guernsey | Netherlands Antilles | Vanuatu |
| British Virgin Islands | Hong Kong | Panama | |
| Cayman Islands | Isle of Man | Samoa |
