Wednesday, February 11, 2009

Singapore is a tax haven - again

A while ago we published a blog entitled "We are not a tax haven" which pointed out a defining mark of a secrecy jurisdiction: it denies that it is a tax haven. They are all at it. Singapore has just done it again.

"Singapore is not a tax haven even as the Government cuts the corporate tax rate to 17 per cent this year. The Republic has low but not no tax; strong rule of law; companies with substantive business activities, and it is now considering adopting an internationally-recognised standard for the exchange of tax information, said Senior Minister of State for Finance and Transport Lim Hwee Hua (pictured) in Parliament on Tuesday.

She was responding to a question from MP Inderjit Singh (Ang Mo Kio GRC) that lowering the corporate tax rate would increase the perception of Singapore as a tax haven."

If you know what a tax haven is, and what a tax haven does, you may have spotted the minister's fallacy already. If not, Richard Murphy explains:

"The tax rate in a territorial system of tax is not the issue: any country can set a tax rate of its choosing in my opinion so long as it does not abuse the right of other nations. The fact is though that Singapore does abuse the rights of other nations with regard to tax. It is a secrecy jurisdiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.

Singapore is replacing Switzerland as the secrecy jurisdiction of choice for this with wealth, and until it shows willing to join the EU STD, for example, it will remain under suspicion. And no minister’s bluster will make any difference."

Now the Minister said a couple of other things, designed to bamboozle people into thinking Singapore isn't a tax haven.

"Unlike tax havens, Singapore has a network of 60 tax agreements with other economies, which enables the Republic to assist in foreign investigations of tax offences, she added.

Still, to ensure that Singapore "remains a trusted financial centre", the Republic is looking to endorse a standard for the exchange of information for tax treaties, said Mrs Lim."

Now this risks confusing people between two things. One is double tax treaties - signed to ensure that a company using Singapore, say, can be sure it won’t be taxed twice, in each treaty country. But that is not the same as a Tax Information Exchange Agreement (TIEA, in the parlance). Singapore has no TIEAs, and have so far declined to sign any. And in any case, the predominant OECD TIEA model is deeply, deeply flawed - one might say they have helped legitimise the illegitimate.

The standard Singapore should endorse is the European Union standard: automatic information exchange. If they do that, and are seen to be fully transparent, exchange information as a matter of routine, and prepare to co-operate fully with other countries, and don’t play silly games with witholding taxes and loopholes, then we will take them off our list of tax havens.

Until then, you know what Singapore is. If you want more details, look at one of our recent blogs, which looks at some investigations carried out by a Singapore opposition party.


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