Singapore’s global standing as a wealth management hub will get another boost as it complies with new tax rules which are designed to stamp out tax evasion.
Under the new rules, local regulators will find it easier to share information about foreign nationals who are under investigation for tax evasion in Singapore with other jurisdictions.
According to a Straits Times article titled “Tax evasion pact ‘boosts S’pore’s global standing”, the rules were set in place after Singapore signed an Organisation for Economic Cooperation and Development’s (OECD) multilateral treaty earlier this year for sharing tax details.
The treaty came about after the 2008 global financial crisis when Western economies were feverishly recapitalising through tax revenue to regain liquidity. The US and European governments are especially fervent in hunting down tax evaders.
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Among the rules include FATCA, a US law which requires financial institutions all over the world to report on financial assets held by US citizens or companies with close US links to the American tax authorities. Singapore is currently signing a deal with the US to make it easier for financial institutions to comply with FATCA.
Banks must also check that their clients’ accounts do not contain proceeds from serious tax offences like fraudulent or wilful tax evasion. Red flags are in place to help them narrow down the search, especially when clients use complex corporate structures to hold their wealth, or have huge sums of money in Singapore when they have no links to businesses here.
Rikvin recognizes that complying with the new rules will be very costly for banks and regulators as they have to upgrade their technical and operational structures to prepare for the transition to more transparent accounting.
However, it will cement Singapore’s reputation as a financial hub, said Mr. Satish Bakhda, Head of Operations at Rikvin, as banks must decide whether to dismiss some of their clients.
“The total costs of upgrading technical and operational systems to comply with the more transparent accounting rules may exceed the tax revenues which will come in, but the reputation of having a clean tax system will be beneficial to Singapore’s reputation in the long term.”
“We foresee that despite the tedious process of purging Singapore’s financial systems of questionable accounts, Singapore will still remain among the world’s largest financial hubs,” he said.