Malaysia asked to drop Labuan from tax treaty

Back in the 1970s U.S. corporations used to avoid taxes wholesale by setting up financing units in the Netherlands Antilles, which were covered by a U.S. tax treaty with the Netherlands. It was a shambolic affair of questionable legality, but a lot of tax was avoided as a result. Now we see something interesting happening on the other side of the world:

"The Korean government is moving to exclude Labuan from a tax treaty with Malaysia as part of efforts to prevent any attempts to evade taxes through the island, which is well known as a tax haven for global investors. Seoul and Kuala Lumpur are currently having talks in Seoul to modify their bilateral tax treaty, which was established in 1983."

A good idea. The Korea Times continues:

"According to the Financial Supervisory Service (FSS), Malaysians invested a total of 964.8 billion won in the local stock market in 2009. They also spent 2 trillion won buying local bonds in the same period. The FSS said 95 percent of those investments were based on Labuan, and a significant portion of those investments came from paper companies, which aim to evade taxes."

A much better idea -- which would help ordinary Malaysians, Koreans and the citizens of a range of other countries - would be for Malaysia to abandon this entire, crooked, abusive set-up.