Singapore, facing EU pressure, says not a tax haven

SINGAPORE Feb 28 (Reuters) - Singapore said on Thursday it was not a tax haven but a low-tax country and that there were no parallels between it and Liechtenstein, where rich Europeans have been dodging tax through secret bank accounts.

Singapore has strict bank secrecy laws and has been promoting itself as a rival financial centre to Hong Kong to manage money for rich local and foreign clients. This has prompted fears in Europe that the Southeast Asian city-state could become a refuge for money fleeing the continent.

"Singapore is not a tax haven. We are a low-tax country but not a tax haven," Foreign Minister George Yeo told a joint news conference with his German counterpart Frank-Walter Steinmeier.

"A situation which arose in Liechtenstein cannot happen here."

Singapore is negotiating a free trade deal with the European Union but at the same time wants to avoid weakening its efforts to create a highly successful private banking centre, while European politicians have warned that Singapore's refusal to soften bank secrecy could scupper the talks. [ID:nSIN147063]

"We're an international financial centre so banking secrecy is very important. It is protected by law. But at the same time we do not condone drug money or terrorism money or money laundering -- these are crimes," Yeo said.

The comments come amid growing international pressure on Liechtenstein and other tax havens to lift the cloak of secrecy from banks as tax agencies across the globe widen probes into tax evasion involving accounts in the tiny European state.

Germany has been joined by a growing number of countries, including the United States, Britain and the Netherlands, in probing secret bank accounts used to hide money in Liechtenstein.

Germany's foreign minister, in Singapore for one day as part of an Asian tour, said on Thursday he had raised the subject of tax evasion with Singapore and that the issue has in the past led to heated debate in talks between the EU and Southeast Asian regional grouping ASEAN.

"I'm not surprised that this topic is being watched here with the highest sensitivity," he said.

"The subject is being discussed with a certain amount of emotion in Germany, and rightly so, because (European) states are losing substantive assets when large entities avoid being taxed."

"I trust this is being understood here. In questions of tax law and tax secrecy Singapore and the European Union are not always of the same opinion. About that we unfortunately have to talk about," he told a joint news conference.

The EU adopted a savings directive in 2005, dealing a first blow to tax havens by forcing European wealth management centres such as Switzerland and Liechtenstein to apply a withholding tax on savings from undeclared EU income.

But efforts to force Hong Kong and Singapore to join have been unsuccessful. (Editing by Neil Chatterjee and Jacqueline Wong)