Crackdown on tax cheats brings greater openness
A crackdown on cross-border tax cheats will increase the information shared in Switzerland, Singapore and other financial centres.Singapore -- A US-led crackdown by wealthy countries on cross-border tax cheats will promote greater openness and benefit Singapore and other global financial centres, bankers and analysts said.
A settlement in August under which Swiss banking giant UBS agreed to reveal the names of some 4,450 American clients suspected of hiding assets signals that confidentiality laws can no longer protect anyone from the taxman, they said.
Members of the Organisation for Economic Co-operation and Development (OECD) also launched their own efforts against citizens who avoid paying taxes by hiding their wealth overseas.
"It is becoming clear that there is no place in any part of the world that can be used for illegal tax avoidance activities," a Singapore-based wealth manager catering to multi-millionaire clients told AFP.
The Swiss-US settlement "sends a clear message around the world’s financial centres, including Singapore, that it is now the era of greater transparency in the banking sector," said the wealth manager, who asked not to named.
Singapore, a regional centre for banking, foreign exchange and insurance, has developed its wealth management industry as a way of accessing Asia's growing affluence.
The Monetary Authority of Singapore (MAS) said that in 2007, assets under management in the island-state totalled USD 814 billion (CHF 847 billion), up 32 percent from 2006. Figures for 2008 were not yet available.
About 86 percent of the total was sourced overseas, including from Europe, the United States, Middle East and the Asia-Pacific region.
Didier von Daeniken, chief executive of Barclays Wealth Asia Pacific, said "what defines Singapore as a competitive financial and business hub are its long-standing strengths."
These include a well-educated and skilled workforce, highly-developed infrastructure, a well-regulated financial system, political stability, reputation for the rule of law and a pro-business environment.
"Unlike tax havens, Singapore has a substantive and well-diversified economy, with manufacturing, services and financial sectors reinforcing one another and penetrating a wide geography of markets," he told AFP.
Earlier in 2009, the OECD listed Singapore as one of the countries that have not yet fully implemented global standards on the exchange of tax information needed to pursue suspected evaders.
The MAS said in a statement to AFP that Singapore endorsed the OECD Standard for Exchange of Information in March and local laws are being changed to comply with them.
Singapore is negotiating new tax accords while existing treaties, including with the OECD, are being amended to incorporate changes allowing for better access to tax information.
"Singapore's recent endorsement of OECD standards... will undoubtedly create greater acceptance of Singapore as a wealth management centre from governments of other developed countries," Barclay's Von Daeniken said.
"At the same time, it will also encourage individuals in those countries to take advantage of Singapore's high standards of security and regulation in the banking industry."
Kevin Grice, an economist with London-based consultancy Capital Economics, said the changes in Switzerland will likely boost Singapore's private banking industry.
"But the Swiss-US agreement, in the post global financial crisis world, could be a template that is spread to other private banking jurisdictions too," Grice told AFP.
The MAS said 43 percent of the assets under management in Singapore in 2007 were from institutional investors like pension funds and endowment foundations as well as corporate and financial institutions, and the rest from individuals.
While it has strict privacy laws, a feature also found in financial centres like New York, London and Hong Kong, the Singapore government has said its financial system has strong protections to screen out illegal money.
"To protect the integrity of our financial system, our laws are rigorously enforced, and we do not tolerate criminal or illicit activities conducted through our banking and financial system," an MAS spokesman told AFP.
Singapore requires all financial institutions to identify and know their customers, and to report suspicious transactions.
Industry representatives also said they have their own measures against laundering illegal funds and they will not risk harming their reputation.
"Singapore has never promoted itself as a centre for these kinds of activities. Singapore is not a tax haven," the Singapore-based wealth manager said.
By closing gaps in tax law now, governments indirectly help ensure that future generations who inherit wealth do not have to fear that they might be taking over illegal funds, she said.
Text: AFP / Martin Abbugao / Expatica