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The Wall Street Journal
Singapore, a key Asian financial center attracting billions of dollars in offshore accounts, is moving fast to become more transparent and is on course to be removed by year-end from a list of countries that shield bank-account information.
“Singapore is moving fast on a twofold approach,” said Pascal Saint-Amams, head of the international tax cooperation division at the Organization for Economic Cooperation and Development. The city-state is “changing its domestic legislation to put an end to any impediment in the exchange of tax information and renegotiating its double-taxation agreements.”
The government has renegotiated six bilateral tax agreements with European countries and aims to conclude talks with seven others in the coming months. It is seeking to get off the OECD “gray list” of countries targeted by the U.S., France, Germany and others over concerns that their tax laws could hide tax evaders and money launderers.
“When Singapore reaches the threshold of renegotiating 12 DTAs, it will be removed from the gray list,” Saint-Amams told Dow Jones Newswires by phone from the OECD’s Paris headquarters. “It’s realistic to expect this by the end of the year.”
Along with several European private-banking banking centers, Singapore in April found itself on the OECD gray list of 38 countries that had agreed to improve transparency standards concerning the exchange of tax information but hadn’t implemented the changes.
In the most high-profile case, Switzerland came under pressure from the OECD and Washington to relax its bank-secrecy laws. Swiss banking giant UBS agreed last month to give the U.S. Internal Revenue Service information on 4,450 accounts that held as much as $18 billion at one time.
More quietly, Singapore, which manages more than US$300 billion of foreign cash, has amended its tax laws. Previously Singapore wouldn’t give overseas authorities information on foreigners’ bank-deposit interest or investment gains. The changes have allowed the government to renegotiate its agreements with the U.K., Belgium, the Netherlands, New Zealand, Australia and Denmark.
“We are satisfied with Singapore’s progress,” the OECD’s Saint-Amams said. “We are monitoring the mechanisms set to allow the exchange of tax information. Some of the countries with which it is renegotiating its DTAs are important OECD members.”
Singapore’s Finance Ministry said in a statement to Dow Jones Newswires that the government “has made substantial progress in implementing the standard” set by the OECD.
The city-state hasn’t, however, thrown its bank vaults wide open.
It says it will be willing to investigate income that isn’t taxed locally only if there are serious, documented suspicions of tax evasion and proof that the foreign authority requesting the information can’t get it directly from the foreign investor or deposit holder.
Singapore’s rival Asian financial center, Hong Kong, is listed by the OECD as being among economies that “have committed to implement the internationally agreed tax standard.” The Hong Kong government said recently it has “stringent and effective anti-tax-avoidance legislation” and doesn’t have laws protecting bank secrecy. A law that would align Hong Kong with international standards on exchange of tax information was submitted to lawmakers in July.
One thing helping Singapore, compared with other countries considered to be tax shelters, is that the governments of the account holders here aren’t likely to push hard for information. The vast majority of the money parked here belongs to wealthy Indonesians, Malaysians, Chinese and other Asians, private bankers say.
“Some of these people with money here are very influential in their home countries,” said one Western observer. “But it’s a relief that Singapore is moving fast to adopt the OECD standards.”
He said some big Western account holders in Singapore “were concerned that refusal or delaying to do so could bring about the pressure and even the embarrassment that Switzerland went through.”
Some 40 institutions offer private banking in Singapore. The industry grew rapidly along with Asian wealth in 2005 and 2006. Singapore encouraged Western banks to expand here, promoting the city-state as a financial center through corporate tax cuts and other business-friendly measures.