The money heads for Panama and Singapore

August 16, 2008
Singapore Democrats

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Vanessa Houlder & Haig Simonian
Financial Times

Tax dodgers are transferring money from Liechtenstein to Panama, Singapore and other secretive offshore centres, intelligence from foreign tax authorities shows.

One official said the switch had been prompted by the greater focus on evasion after the theft of client details from LGT and Liechtensteinische Landesbank.

The banks themselves have said little about the extent of outflows from the principality. LGT revealed earlier this year it had suffered only limited damage. However, updated information when the two banking groups report first-half results later this month should show accelerated withdrawals, according to some local financiers.

One beneficiary could be Panama. The Sovereign Society, a US publisher specialising in offshore planning, says the country has “iron-clad financial privacy laws” and describes it as “an ideal 21st century offshore haven in a world where few remain”.

But Panama has constraints for Europeans, being less accessible than favoured havens such as Switzerland and Liechtenstein. Sue Holmes, a specialist in investigations at Smith & Williamson, a professional services firm involved in several cases involving Liechtenstein, said Panama was perceived as less secure. “It is a fairly risky place.”

Singapore, the world’s fastest-growing private banking centre, expected to gain from Liechtenstein’s troubles, Daniel Truchi, global head of Société Générale’s private banking business, told the FT in March. “Because of what happened in Liechtenstein, we will see a higher flow of funds into Singapore. The momentum is accelerating.”

Singapore and Hong Kong benefited from a 2005 clampdown on European tax secrecy, says the Institute for Fiscal Studies, the independent think-tank.

“In 2003 Hong Kong and Singapore experienced a massive influx of capital, apparently from European sources, as the adoption of the savings tax directive began to seem a realistic possibility.”

Tax experts say evaders can reduce, but not eliminate, the risk of detection by transferring money from one haven to another.

“Families with undeclared money can run, but they cannot hide,” says Philip Marcovici, a private banking specialist at Baker & McKenzie in Zurich. Ms Holmes says many people wrongly think they will not face detection. “My recommendation is to come clean. Tax havens are pretty vulnerable to attack.”

In a speech in June, Jeffrey Owens, director of the tax policy centre at the Organisation for Economic Co-operation and Development, condemned at least 10 countries for failing to recognise that secrecy is a “relic of the past”.

Panama was dropped from the OECD’s list of “unco-operative tax havens” – which now features only Monaco, Liechtenstein and Andorra.

But there is widespread frustration among OECD members that Panama has not improved transparency.

Panama has responded angrily. Along with other small financial centres, it has told the OECD it will increase transparency only if there is a “level playing field” created by member states meeting the same standards.

http://www.ft.com/cms/s/0/c7843226-6b2a-11dd-b613-0000779fd18c.html?nclick_check=1