Singapore’s attractiveness as a low-tax bolt hole has been gathering headlines in Australia thanks to stories that Gina Rinehart and Nathan Tinkler have bought property in the foreigners-only enclave of the Sentosa Cove project. Singapore famously doesn’t have a capital gains or inheritance tax and personal tax is at a 20% top rate against 46.5% in Australia (plus the Medibank levy). Sounds like heaven on a stick for the rich.
Those attractions have contributed to the rise in stories about rich foreigners fleeing their homelands to relocate in Singapore (much as rich Poms in banks and finance fled the UK for Switzerland several years ago, only to find their expensive move was undone by a change of government and the realisation that Orson Welles was right in The Third Man about cuckoo clocks and Switzerland). Singapore’s high secrecy levels on bank accounts and associated transactions has been especially appealing to more and more rich people as Switzerland has whittled away its strict secrecy laws under pressure from Germany, the US and OECD, and Lichtenstein has been cracked by hackers purloining data and selling it to tax authorities around the world.
But it would now seem that anyone who moved to Singapore or set up an account or other arrangements in the country to take advantage will have to think again. The Singapore government and its conservative but ferocious central bank, the Monetary Authority of Singapore (MAS), have made it clear the attractions of the island state do not go as far as Switzerland in facilitating tax avoidance and money laundering.
In other words, moving to Singapore to wash or hide black money is out, as is the under-declaration of tax in another country and the transferring of the proceeds or untaxed amount to a Singapore financial institution. (And that includes those who might try and wash money through the mega casino, also on Sentosa).
Last week, the MAS told the island state’s banks that it would heavily penalise anyone that facilitated tax evasion, designating tax crimes as a money laundering “predicate offences”, making it illegal for a bank to assist tax evaders in hiding funds. The MAS said this was designed to “discourage the entry of tax evasion monies into our financial system and protect Singapore’s reputation as a trusted financial centre”. The new rules will apply to new and existing accounts.
And banks, financial groups and others can’t claim ignorance as a defence, as the MAS made clear in its circular:
“[Financial institutions] will need to understand a client’s tax-risk profile and apply customer due diligence, transactions monitoring and control measures that are commensurate with the assessed risks, to effectively detect and deter the laundering of proceeds from serious tax offences through the financial system.”
And to make that latter point very clear, Singapore on Sunday signed a deal with Germany to share information that will help Berlin detect potential tax dodgers and avoiders using Singapore as a hideaway. Under the deal, both counties may exchange information for the enforcement of the domestic tax laws “of the requesting country”, expanding this beyond taxes on income and capital. Nor will the exchange depend on the taxpayer being resident in either country.
Australia has around A$1.3 trillion in our superannuation system, as well as hundreds of billions in other managed accounts independent of the retirement savings system.