Investors looking to avoid the EU Savings Tax Directive by moving to Singapore may have pulled the short straw. Under pressure from OECD countries over its impressive bank secrecy, Singapore has looked to buckle up with its senior finance minister denying that it is a tax haven, and encouraging further OECD cooperation.
The mininster for Finance and Transport Lim Hwee Hua has said that although the Republic has low taxes, it has a strong rule of law and is looking to adopt the Organisation of Economic Cooperation and Development (OECD) standard for transparency and effective exchange of tax information.
‘We will be engaging the OECD and the industry to study this OECD standard with a view to endorsing it,’ said Lim.
This news may frighten many investors who have invested in Singapore offshore banking following the introduction of the EU Savings Tax Directive in 2005. It requires countries that are signatories to either deduct withholding tax at source or disclose details of foreign depositors to their home jurisdictions.
The directive caused many investors to flee out of havens that were affected by the measure such as the Channel Islands, Switzerland and the Cayman Islands to farther fields such as Honk Kong and Singapore.
Singapore saw a huge expansion of its wealth management business due to its perceived independence from the EU. Total assets in the Singaporean banking system grew from $150 billion in 1998 to $1.173 trillion by the end of 2007 reports citynewswire.
Countries which have agreed to comply with the EU directive are Andorra, Anguilla, Aruba, Austria, Belgium, British Virgin Islands, Cayman Islands, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Isle of Man, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Montserrat, Netherlands, Netherlands Antilles, Poland, Portugal, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turks and Caicos, the UK – but up until now, not Singapore or Hong Kong. See OECD website for recent bilateral tax agreements
Both are huge banking centers in their own right and attractive to foreign investors – but for how long?