Singapore Tax Deal with Germany in Progress
Singapore tax rates are known for being low, and while this is one factor that encourages a great deal of foreign direct investment, it has also been known to attract foreign businesses that move large amounts of money to Singapore’s banks in order to evade tax in their home countries. Now, Singapore’s financial authorities are looking to clamp down on tax evasion; the Ministry of Finance in Singapore and the Federal Ministry of Finance in Germany have struck a deal that will help detect and deter German tax dodgers using Singapore as a financial hideaway.
An End to Banking Secrecy
Both countries will be incorporating the latest standards on information exchange put in place by the OECD (Organisation for Economic Cooperation and Development) in their double taxation accord; once this accord is ratified in both Singapore and Germany, the countries’ authorities will share information on a forms of tax, whereas they currently only share information covering income and capital taxes. Information can also be exchanged regardless of whether the taxpayer in question resides in either Germany or Singapore. Authorities are determined that banking secrecy “will not constitute an obstacle to exchanging information”.
German authorities are also hoping to close a deal with Switzerland to ensure more open communication and prevent tax evasion. This deal should take effect in January next year if it is ratified in both countries.
Protecting Singapore’s Reputation
The Germany-Singapore deal has been made soon after a statement by the Monetary Authority of Singapore that banks found to be facilitating tax evasion will be strongly penalised in the future. According the Monetary Authority, this move should “discourage the entry of tax evasion monies into our financial system and protect Singapore’s reputation as a trusted financial centre”.
In Singapore, tax rates are highly favourable for locals and expats alike; they go no higher than 20% and there is no capital gains tax. The safe, clean city has long been a haven for high-end earners and spenders. Now, as European Governments look to improve tax collection and ease financial strain in the EU, more countries are under pressure to be more transparent about their taxes to avoid allegations of illicit activities like assisting tax dodgers. Singapore’s officials agree that taking a stand against tax evasion will only benefit the country. “Singapore stands a lot to gain from proactively embracing the move towards global tax transparency” says a senior associate at a leading Singapore law firm
The Singapore-Germany deal was agreed upon while German Finance Minister Wolfgang Schäuble visited Singapore tax officials this month.
Nicky Warner is a London-based business blogger who hopes this latest move will make things smoother for companies renting Singapore office space.By theodion in Taxation Comments Off