20 Oct, 2009
S'pore poised to enter tax 'white' list
Tax regime changes allow it to implement standard for sharing information
By Francis Chan
LATEST changes to the local tax regime will see Singapore edge closer towards getting on a list of the world's leading tax jurisdictions.
The Income Tax (Amendment) (Exchange of Information) Bill, passed by Parliament yesterday, will allow Singapore to implement an internationally agreed standard for the exchange of information on tax matters.
That is key to getting out of a 'grey' list of nations committed to the standard but have yet to fully implement it.
'This enhanced scope of cooperation will not only allow Singapore to provide greater assistance to its prescribed treaty partners, but also help Singapore obtain information for the enforcement of our domestic tax laws,' Finance Minister Tharman Shanmugaratnam told Parliament.
Singapore was in the spotlight earlier this year when the Organisation for Economic Cooperation and Development (OECD) put it on a grey list of countries that the organisation considers lax when sharing tax information with foreign tax jurisdictions.
The OECD has three lists: black, grey and white, with countries ranked according to their willingness to stick to its standards.
Countries on the black list are those 'not committed to implement the internationally agreed tax standards'.
White-listed countries are those that have largely implemented the standards and have formal agreements with at least 12 other jurisdictions - the pre-set benchmark - to incorporate the standard.
The OECD's 2008 Standard for the exchange of information through Avoidance of Double Taxation Agreements (DTAs) was accepted as the global yardstick by the United Nations' Committee of Experts on International Cooperation in Tax Matters in October last year.
Mr Tharman pointed out yesterday that Singapore had already announced its intention to endorse the standard in February this year - before the OECD put out its listing of countries according to their compliance with the standard in April.
Yesterday, he also disclosed that Singapore has reached an agreement with 20 jurisdictions to incorporate the 2008 Standard under its DTAs with them.
It has formally signed such agreements with 11 of those jurisdictions. They are Australia, Austria, Bahrain, Belgium, Denmark, Mexico, the Netherlands, New Zealand, Norway, Qatar and the United Kingdom.
'We are confident that we will formally conclude more than 12 agreements before the end of this year,' said Mr Tharman.
Once 12 such DTAs have been signed, Singapore will graduate to the white list, as 12 is the target set by the OECD.
As for a similar pact between Singapore and the United States, Mr Tharman said: 'Both Singapore and the US are keen to explore a comprehensive DTA, and I expect the process to get under way next year.'
The new law will widen the scope for information exchange between jurisdictions.
One way is by lifting the 'domestic interest condition'. This had meant that tax information requested by a foreign authority needed to be relevant to the enforcement of Singapore tax laws before the tax authorities here would act.
Singapore will now allow a foreign jurisdiction access to information from banks and trust companies as long as requests are 'clear, specific, relevant, and consistent with the exchange of information standard'.
Responding to concerns raised by MPs about the new Bill, Mr Tharman pointed out that it contained safeguards for taxpayers' rights.
'Spurious or frivolous' requests for information will not be acceded to, he said, stressing that requests will need to be 'specific, detailed and relevant' to the taxpayer in question.
Such 'fishing expeditions' can be stopped at two levels - by the Inland Revenue Authority of Singapore itself, and then by the High Court if it relates to information protected under the Banking Act and Trust Companies Act, he added.
As for concerns that the new law may tilt the playing field against Singapore compared to other financial hubs, Mr Tharman noted that Hong Kong and Switzerland are taking steps similar to Singapore's to 'enhance' their tax regimes.
'What we have always believed is that the issue of cross-border tax evasion has to be addressed through the rule of law and the basis of a level playing field internationally, ' he said.
Martin Koh/ Sherry Tang