Singapore is clamping down on foreigners shifting money to its banks to evade tax by striking a deal with Germany that will help Berlin detect potential tax dodgers using the Asian financial hub as a hideaway.
The move came in a deal agreed on Sunday by the Singapore government and Wolfgang Schäuble, visiting German finance minister.
It comes on the heels of an announcement by Singapore last week that it would heavily penalise banks that facilitated tax evasion, designating tax crimes as a money laundering “predicate offences”.
That means it would be a money laundering offence for a bank to assist tax evaders in hiding their funds. The Monetary Authority of Singapore 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”.
Both actions highlight how Singapore, which has become a magnet for private banks managing wealth in Asia, is complying with global standards on tax evasion as regulators put the squeeze on banks to try to stop the practice.
Huge flows of money have come into Singapore in recent years from the region. Funds have also come from wealthy people in Europe, where regulators have been bearing down on tax evasion since the 2008 financial crisis.
The Monetary Authority of Singapore, the city-state’s central bank, says there were S$1.34tn ($1tn) of assets under management last year – about level with Hong Kong. Singapore is fast catching up with Switzerland, the world’s largest wealth centre.
Singapore last year said it was making what it said was a “pre-emptive” policy shift to adhere to new regulatory standards, setting it on a course to balance the need to remain competitive as an Asian financial centre with ensuring it is complying with international rules against tax dodging.
“The government is conscious of being ahead of the curve in terms of adhering to international standards because a lot of Singapore’s economic success is dependent on its reputation as a well regulated financial centre,” said Dawn Quek, senior associate at Baker & McKenzie Wong & Leow, the law firm. “At the same time, the government is conscious of being businesses friendly.”
Last week the MAS told banks operating in Singapore that by July next year there would be severe penalties for banks accepting clients engaged in tax evasion.
This brings Singapore into line with new requirements announced in February by the Paris-based Financial Action Task Force designating tax crimes as money laundering offences.
Renato de Guzman, chief executive of Bank of Singapore, said he believed the latest MAS move would “further entrench Singapore’s position as Asia’s premier wealth management hub”.
Under the deal between Singapore and Germany, the two counties could exchange information for the enforcement of domestic tax laws “of the requesting country”, expanding this to all types of tax, not only taxes on income and on capital. Nor will the exchange depend on the taxpayer being resident in either country.