UPDATE 1-Singapore passes tax law to improve transparency

* Law enables foreign govt requests for bank info

* Meets OECD requirement, nears tax "white list"

* Private banks say transparency will attract clients

(Updates with details throughout)

By Nopporn Wong-Anan and Neil Chatterjee

SINGAPORE, Oct 19 (Reuters) - Singapore, under pressure from the G20 to improve banking transparency, passed a bill in Parliament on Monday amending its income tax law to comply with OECD standards to fight cross-border tax evasion.

The new bill enables the Singapore government to ask banks for client information in potential cases of foreign tax evasion, and moves the city-state a step closer to being taken off the OECD's "grey list" of uncooperative tax countries.

Private bankers say the greater transparency could attract more clients from the Middle East and Europe who are looking to diversify away from scandal-hit banks and to gain exposure to fast-growing Asian markets.

"Singapore did the right thing in signing up to the OECD standards -- it avoids an influx of money coming for the wrong reasons," said Pierre Baer, Societe Generale's head of private banking for Singapore and South Asia.

"People come to Singapore because it's a natural draw to emerging markets," he said, adding Singapore had also adapted well to cater to the region's growing millionaires.

The wealth of high net worth individuals in Asia-Pacific, or those with over $1 million to invest, is expected to grow 8.8 percent a year for the next 10 years, despite last year's setbacks, according to a Merrill Lynch/Capgemini report.

Private bankers in Singapore discount the possibility of greater transparency driving some clients away, since they say all financial centres are moving in the same direction and there will soon be a level playing field.

For an analysis on Asia's wealth managers preparing for greater banking transparency, see [ID:nSP436002].

If there are greater fund flows into the city-state, it could be a boon for an economy that is looking to grow its financial services sector and wealth management sector to diversify away from manufacturing.

Fund flows could also help support strength in the Singapore dollar SGD=, the central bank's monetary policy tool.

NO FISHING

The financial crisis has spurred the global crackdown on tax evasion as embattled governments look to rake in revenues. For a Q+A story on the moves, see [ID:SIN463464].

Singapore endorsed the OECD's standard for the exchange of information for tax purposes in March and has been renegotiating existing agreements with various countries since then. It only needs to sign one more treaty to get off the OECD "grey list".

However, much of Singapore's wealth under management comes from Asian countries such as Indonesia, and so far Singapore has yet to sign new treaties with its neighbouring countries.

Experts said that if Indonesia, which has recently taken a tougher stance against tax evasion, was to successfully push for a new tax deal, it would worry banks and their clients.

The new domestic legislation only applies to specific requests from countries that signed the treaties with Singapore.

"This enhanced scope of cooperation will not only allow Singapore to provide greater assistance to its prescribed treaty partners, but also help Singapore obtain information for the enforcement of our domestic tax laws," said Finance Minister Tharman Shanmugaratnam in Parliament.

"It does not allow for 'fishing expeditions'," he said. (Editing by Ron Askew)