Singapore Democrats

One of the most attractive aspects of Singapore as an offshore jurisdiction is that it has one of the lowest taxation rates in Asia. Non-residents who park their money in Singapore pay no taxes if that money is earned outside of Singapore, and investment gains earned in Singapore (from stocks for example) are also exempt from tax. Singapore is also one of the few offshore centers which was not included in the EU Savings Tax Directive in 2005, an EU initiative to exchange information on EU citizens parking money abroad for tax reasons. In Singapore, not paying taxes owed to foreign authorities is not a crime. In 2004, Singapore amended its trust laws to allow foreigners to sidestep state interference in many European countries which dictates how inheritance is carved up.

What was strange about this portal was that given its claims as the "leading" information website for banking in Singapore, there are no names listed on it. Apart from an email address This e-mail address is being protected from spambots. You need JavaScript enabled to view it , the website doesn't reveal the organisation or individuals running it. Its front page pictures a gentleman cupping his chin as if in deep contemplation but doesn't tell us who he is.

The reluctance of those running this operation to be openly identified is perhaps understandable given that it seems to be giving advise on how to circumvent troublesome laws in other jurisdictions, especially Europe.

Can we afford to be Asia's Switzerland?

Such an approach not only attracts foreign funds but also foreign opprobrium. There are more than concerns that Singapore has become a tax haven in the mould of Switzerland, a place where individuals and corporations go to deposit their cash, often to avoid taxation in their own countries.

Not only have tax evaders found a haven in Singapore, money-launderers are also flocking to the city-state. Former chief economist at Morgan Stanley, Andy Xie, wrote in a private email that was inadvertently leaked to the public, said that Singapore's financial success "came mostly from being the money laundering center for corrupt Indonesian businessmen and government officials.''

In 2006, now bankrupt Merrill Lynch and Capgemini reported that the number of "super-rich" Indonesians living in Singapore is a staggering 18,000 whose wealth amounts to approximately US$87 billion. Much of this wealth, complains the Indonesian Government, came from illegal activities in Indonesia.

Xie added that in order to sustain its economy, Singapore was resorting to "building casinos to attract corruption money from China."

Corrupt ruling generals in Burma are also suspected to be stashing their assets in Singapore, leading many to criticise the PAP Government following the Burmese regime's crackdown on monks and civilian protesters in 2007.

Not too long ago, a friend of mine from Cambodia intimated to me a story about four women, all single, from Phnom Penh depositing $80 million between them in Singapore banks. No questions asked.

"Four single women? $80 million? From Cambodia which is dirt poor?" she asked with a mixture if rhetoric and incredulity, "And no one here bothers to ask how they got the money?" In case anyone thinks that the remark carried sexist overtones, my friend was female and a hard champion of equal rights for women.

In a report in 2000, the United States State Department pointed out that the system in Singapore "provided opportunities for money launderers to conduct a wide range of illicit transactions." (The subject of money laundering is discussed in greater detail in my book A Nation Cheated.)

Our rules

Of course, the Government denies these charges saying that "our banking and financial system is open and transparent, and our rules vigorously enforced."

Perhaps. But the devil is in the fine-print, so they say. In an exchange of emails, Markus Meinzer of the Tax Justice Network (TJN), an organisation calling for greater action on tax havens, told me that "the main and biggest (but not only) problem with the Singapore tax haven legal structure consists in the requirement of an domestic tax interest being present if a request for criminal assistance in tax matters is made."

This means that if a foreign government requests for information on accounts suspected of tax evasion in Singapore, the Government will only cooperate if and only if the case also involves an evasion of tax due to the Singapore authorities.

This effectively puts paid to foreign governments wanting information about their tax fugitives who stash their money in Singapore. Remember what that curious website, Offshore Banking Singapore, was selling? "In Singapore, not paying taxes owed to foreign authorities is not a crime." If it is not a crime in Singapore then no can do, we will not release information about the tax offender.

This problem was highlighted in a case in 2005 involving a former chief of an Italian bank, Gianpiero Fiorani, who was arrested in Milan for suspected misappropriation of funds. Fiorani had then shifted some of his assets to Singapore through a Swiss bank. The Wall Street Journal reported that when he was questioned by the police following his arrest, Fiorani said that he had moved his funds "to better protect the money" and for "peace of mind."

When contacted about the matter the Monetary Authority of Singapore declined to comment.

It is such unwillingness to cooperate with foreign governments and the lack of transparency that has solidified Singapore's reputation as a tax haven. Part II of this article, which will be posted in a couple of days, looks at how tax havens affect the world's major economies, and how these places are fighting back.


Part II and Part III

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