On October 13, German Finance Minister Dr Wolfgang Schäuble visited Singapore for two days and met Singapore
Prime Minister Lee Hsien Loong for discussion.
In the meeting, they exchanged views on development in the eurozone and Asia while agreeing to crack down tax dodgers.
Germany has been wary of some of its citizens moving their funds to Asia.
This happened after Berlin signed a treaty with Switzerland to release clients list of German who are dodging tax by hiding taxable income in Swiss Bank.
In August 2011, Swiss government agreed to impose tax on monetary yields held by UK citizens in Swiss bank accounts for the first time.
In November, Swiss bank Credit Suisse sent letters to some US clients saying their account details might be given to the Internal Revenue Service. Investors began to perceive that Switzerland would no longer remain as tax haven while the next ideal solace for funds went to Singapore.
In a report by the Boston Consulting Group in May this year, Swiss banks could see assets from Western Europe may drop 28 per cent to US$668 billion by 2014 because of imposing tax on undeclared accounts.
On the other hand, Singapore and Hong Kong are both looking forward to benefit from the movement of funds.
In recent years, Singapore and Hong Kong have emerged as a regional hub for private banking and wealth management.
Till date, these two Asian hubs manage about US$1 trillion offshore funds while 75 per cent of it came from the Western Europe.
Though Switzerland is the largest offshore wealth centre with assets estimated US$2.1 trillion now, the two Asian hubs may take over Switzerland to be the largest wealth centre in 15 to 20 years.
Singapore, with tax rates that top at 20 per cent with no capital gain tax, has been attracting many foreign institutions to this global financial hub since year 2000.
Due to its first world economy, political stability and sound social security, Singapore has been enjoying its reputation as an open economy with the world’s highest concentration of millionaires.
This little red dot on the world map consists of only 5.3 million populations but has been accused of being a magnet for tax evaders.
Generally, Singapore portrays itself as a tropical refuge with highend luxury lifestyles like exclusive residential properties, marinas for super-yachts, casino gaming, fine dining, high-end boutique etc.
Over the years, Singapore has attracted many rich residents like Eduardo Saverin, co-founder of Facebook, New Zealand-born investor Richard Chandler and many more. From the property boom over past two decades, many locals have made fortunes in the real estate.
Even the government has imposed 10 per cent property tax on foreigners as part of the efforts to cool the housing demands, this has done little to dissuade the wealthy from ploughing money into Singapore real estates. When it comes to tax dodging, Singapore has been taking measures to clamp down on foreigners shifting their funds to the city-state with an intention to avoid paying their home taxes. Over the past three years, Singapore has upgraded most its tax treaties with other countries to exchange information on hunting down tax dodgers.
From next year 2013, bankers who help clients to evade tax risk will be charged with money laundering crime. According to the Monetary Authority of Singapore (MAS), the new rules are part of an effort to protect the integrity and reputation of Singapore as a global financial centre.
From July 2013, MAS will also implement more rules to regulate banks for toughening scrutiny of clients who plan to designate a variety of serious tax crimes. In 2010 and 2011, a total of 44 people were convicted of money laundering offences in Singapore whom most cases were related to tax fraud.
The Commercial Affairs Department seized and froze nearly S$130 million from these cases. With the new and tighter rules to clamp down foreign funds moving to Singapore, this may again result in funds shifting out of Singapore.
While we may see some real estate softening and correction in equity markets in 2013, this could preserve better reputation of Singapore in reinforcing the anti-money laundering law. If you are looking for opportunities for your next portfolio, patience is the key to your wealth.
Aaron Chan coaches retail investors in financial tradingand investment. The expressions are solely his own. He canbe reached at [email protected].