Singapore seeks transparency

September 14, 2009
Singapore Democrats

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Costas Paris
The Wall Street Journal

Asian Financial Hub in a Hurry to Get Off Bank Account-Shield List

Singapore, an Asian financial center attracting billions of dollars in offshore accounts, is working quickly to become more transparent and is on course to be removed by year’s end from a list of nations that shield bank-account information.

Pascal Saint-Amams, head of the international tax cooperation division at the Organization for Economic Cooperation and Development, said “Singapore is moving fast on a twofold approach.”

He said 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 tax agreements with six OECD countries and aims to conclude talks with seven others in the coming months. It is seeking to get off the OECD’s “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 [double-taxation agreements], it will be removed from the gray list,” Mr. Saint-Amams said from the OECD’s Paris headquarters. “It’s realistic to expect this by the end of the year.”

Singapore is changing its laws, among other moves, to get off an OECD list of nations targeted over concerns their laws could hide tax evaders.

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 the U.S. to relax its bank-secrecy laws. UBS AG 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. Singapore, which manages more than $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,” Mr. Saint-Amams said.

The Singapore Finance Ministry said the government “has made substantial progress in implementing the standard” set by the OECD. However, the city-state hasn’t thrown its bank vaults wide open.

Singapore 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 financial rival, Hong Kong, is listed by the OECD as 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.

One thing helping Singapore is that the home governments of account holders in the city-state aren’t likely to push hard for information.

Most of the money parked in Singapore 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 observer.