SINGAPORE Oct 15 Billionaire Australians buying
exclusive condominiums. Germans moving money from Swiss
accounts. Secretive banking laws. Asia's premier wealth
management centre. Low tax rates.
As Singapore revels in its reputation as an open economy
with the world's highest concentration of millionaires, the tiny
island of 5.3 million people is also accused of being a magnet
for tax evaders - an image it is vehemently seeking to banish.
Amid German concerns that its wealthy citizens are moving
funds from Switzerland before a new German-Swiss tax treaty
takes effect next year, Singapore and Germany said on Sunday
they had agreed to bolster their double-taxation agreement with
internationally agreed standards on information sharing.
"Banking secrecy will not constitute an obstacle to
exchanging information," said the joint statement, which came at
the end of German Finance Minister Wolfgang Schaeuble's weekend
visit to Singapore.
Media reports have put the amount of German money moving to
Singapore in the double-digit billions.
"The perception is that Swiss banks have concluded
Switzerland is unlikely to remain a tax haven for much longer
and Singapore is the new place to do business," said Ronen
Palan, a professor at City University London who has conducted
numerous studies on offshore finance.
Swiss banks could see assets from Western European clients
fall 28 percent to 623 billion Swiss francs ($668 billion) by
2014 because of the deals to tax undeclared accounts, the Boston
Consulting Group said in a report in May.
Singapore and its rival Hong Kong look set to benefit.
Together, the two Asian hubs manage $1 trillion in offshore
funds, with about 75 percent of that coming from within the
region. But Singapore and Hong Kong may overtake Switzerland -
now the largest offshore wealth centre with assets of about $2.1
trillion - in 15 to 20 years, Boston Consulting said.
"INTEGRITY AND REPUTATION"
Singapore, with tax rates that top out at 20 percent and no
capital gains tax, is already synonymous with wealth. BMW and
Mercedes were the top two brands among all cars sold in the
first eight months of this year, bestsellingcarsblog.com says.
Safe and clean, the city-state bills itself as a tropical
refuge with exclusive residential enclaves, a marina for
super-yachts, two casinos, fine dining, high-end boutiques and
an annual Formula One race that brings in the global jet-set.
Rich residents include Eduardo Saverin, the co-founder of
Facebook, who has called Singapore home since 2009.
Brazilian-born Saverin, who renounced his U.S. citizenship
this year, was in eighth spot on a Singapore rich list published
by Forbes Magazine with an estimated net worth of $2.2 billion.
Locals who made fortunes in real estate, finance and trading
figured prominently but the list also included New Zealand-born
investor Richard Chandler with $2.9 billion and China-born
property developer Zhong Sheng Jian with $1.4 billion.
A 10 percent property duty imposed on foreigners, part of
efforts to cool the housing market, has done little to dissuade
the ultra-wealthy - many of them Chinese, Indian, Malaysian and
Indonesian - from ploughing money into Singapore real estate.
Australian mining tycoons are also moving in. Gina Rinehart
reportedly paid S$57 million ($46.7 million) for two units at
Seven Palms Sentosa Cove, a luxury beachfront condominium, while
Nathan Tinkler recently moved his family to Singapore.
But authorities bristle at any suggestion of tax dodging.
A short paragraph on page 17 of an Indian government white
paper on "black money" was inflamatory enough to prompt
Singapore's prime minister, Lee Hsien Loong, to make a formal
complaint in July to his Indian counterpart Manmohan Singh.
The paper did not directly call Singapore a tax haven but
suggested figures showing it accounts for nearly 10 percent of
foreign direct investment in India could be due to Indian
nationals routing money through the city-state to avoid taxes.
"We have demarched the Indian government on this matter to
put this record straight and explain why this is not true and it
has been mistaken," Lee said during a visit to New Delhi.
Over the past three years, Singapore has upgraded half of
its 70 tax treaties with other countries to make it easier to
exchange information on possible tax dodgers.
From next year, bankers who help clients evade tax risk
ending up in court on money laundering charges.
The new rules are part of "efforts to protect the integrity
and reputation of Singapore as a trusted international financial
centre," the Monetary Authority of Singapore (MAS), the central
bank and financial regulator, said last week.
The first stage of a peer review by the Organisation for
Economic Co-operation and Development in 2011 found Singapore
had most of the agreed standards in place but needed to continue
to update and expand its information exchange pacts.
Thomas Eigenthaler, chairman of the German Tax Union,
welcomed an upgrade to Germany and Singapore's "rudimentary,
fragmentary" tax agreement but said "the decisive thing will be
how it is actually implemented."
BENEFITS OF TRANSPARENCY
Palan at City University London said trying to assess the
city-state's credentials is tricky, partly due to difficulties
getting detailed information about its offshore finance sector.
"We cannot get any access to Singapore and that for us does
raise flags," he said. "It's easier to do research on Jersey or
Switzerland but in Singapore it's almost impossible."
Before the start of the global financial crisis in 2008,
most questions about Singapore's offshore role focused on the
billions of dollars kept in the city-state by rich Indonesians.
Now, as cash-strapped Western governments ramp up their
efforts to improve tax collection and Swiss banks are forced to
open up their books, Singapore is facing renewed accusations
that some of the funds flowing in may be illicit.
Lawyers say much of the recent inflows reflect the growing
number of Asian millionaires, the region's strong growth and the
fact that some legitimate funds are choosing to abandon offshore
centres with less savoury reputations in favour of Singapore.
As more tax-paying millionaires want to get exposure to
Asian growth, they say, Singapore must do all it can to show it
will not tolerate black money.
"Singapore stands to gain a lot from proactively embracing
the move towards global tax transparency," said Dawn Quek, a
senior associate at law firm Baker & McKenzie, Wong & Leow.
The MAS is pushing banks to toughen scrutiny of clients with
plans to designate a variety of serious tax crimes as predicates
for money laundering offences from July 2013.
In 2010 and 2011, a total of 44 people were convicted of
money laundering offences in Singapore, mostly related to fraud,
and close to S$130 million ($106.5 million) was seized or
frozen, the Commercial Affairs Department said.
"Singapore has always taken a tough enforcement approach
against money laundering and our authorities will not hesitate
to pursue and prosecute such cases," MAS told Reuters.
($1 = 0.9323 Swiss francs)($1 = 1.2211 Singapore dollars)