The Online Citizen

TOC Opinion: Singapore a “blacklistee” to be?

April 04
18:41 2009


Choo Zheng Xi/Editor-in-Chief

With contribution from Darren Boon

You would be justifiably confused attempting to make sense of the Organisation for Economic Co-operation and Development (OECD) progress report on tax havens that emerged from the G20 summit. Has Singapore been “blacklisted” as The Daily Telegraph claims, or is the Straits Times right in saying we are on a “greylist”?

The good news for the Singaporean government is that The Daily Telegraph is wrong. The bad news is that while this report buys Singapore time, many uncomfortable questions about our status as a tax haven remain unanswered.

The “blacklist” explained

The nature of international diplomacy is probably to blame for the confusion.

Negotiations on a “blacklist” were contentious because of China’s sensitivity about Hong Kong and Macau appearing on it, as well as disagreements over the criteria for inclusion on the list.

The resulting document was entitled a “Progress Report”, which had three categorizations of countries’ compliance with OECD tax standards:

1) Jurisdictions that have substantially implemented these standards

2) Jurisdictions who have committed to these standards but have not yet implemented them (38 countries including Singapore)

3) Jurisdictions that have not committed to the standards (4 countries)

Richard Murphy, a columnist with The Guardian, notes that this compromise involved “several shades of grey”.

This would be an apt characterization of the category Singapore finds itself in. While it’s clear that the third category of countries is in most danger of triggering sanctions, Singapore has promised to meet the OECD standard for the effective exchange of information through Avoidance of Double Taxation Agreements (DTAs).

Now comes the bad news: this might not be enough to guarantee Singapore isn’t labeled a tax haven in the future. Signing of the Standards on DTAs are a red herring, and are unlikely to keep Singapore off the OECD blacklist for long unless accompanied by serious efforts to cooperate with international requests for information on money laundering.

Singapore banking secrecy

The crux of OECD irritation at Singapore is that our banking secrecy laws might have become an obstacle to other governments seeking to retrieve information on their tax evaders laundering money in our jurisdiction.

In an email response to TOC, Valerie Schilling, a spokeswoman for the Financial Action Task Force, noted Singapore did not seem to be implementing its anti-money laundering laws effectively in practice, in relation to foreign money laundering:

“Sufficient attention is not being paid to pursuing cases involving foreign predicate offences (i.e. criminal offences that are committed abroad) where the proceeds are being laundered in Singapore. Consequently, there appears to be a low number of prosecutions and convictions for money laundering, given the level of money laundering risk and the size of Singapore’s financial sector”.

This seems to be corroborated by an article by UK think tank Research Republic and published by City of London, which highlights how banking secrecy laws might hinder foreign countries’ pursuit of tax evaders:

“One of the main strengths enjoyed by Singapore is its banking secrecy laws, which are now widely regarded as being stricter even than those of Switzerland…Evasion of taxes is illegal in Singapore, but authorities are unwilling to cooperate with other countries and provide information about tax evaders unless there is some evasion of Singaporean taxes involved.”

The Ministry of Finance’s press statement suggests that this culture of secrecy will be maintained as far as it will allow us to comply with OECD standards on DTAs: “Singapore will implement the Standard through our DTAs to assist on bona-fide requests for information rather than information fishing”.

What is a DTA and is it enough?

But is signing up to standards on the DTA enough to stave off eventual labeling as a tax haven? MOF seems to be implying that it is, by touting the signing of DTAs.

This is probably misleading.

A DTA is an agreement between two states to prevent income or profits from international economic activity between their countries being taxed twice. Except for a single article, Article 26, it says nothing of the exchange of information between contracting States.

This is a far cry from OECD disclosure standards in a Tax Information Exchange Agreement (TIEA), whose entire purpose is to facilitate “information exchange to prevent harmful tax competition between countries”. (OECD Model TIEA)

A TIEA, unlike the DTA, specifies in much greater detail rules and procedures on information exchange between States.

Understandably, the OECD is more interested in countries signing TIEAs. TIEAs are the international legal tool with which countries can request information from its partner TIEA signatory to disclose information on suspected money launderers. A minimum of 12 TIEAs seems to be the threshold of compliance with OECD standards*.

Singapore laws on banking secrecy need to rethought so that a balance can be struck with our desire to cooperate with the international community’s attempts to apprehend money launderers. MOF’s less than subtle attempt to divert the international community’s attention from TIEAs by highlighting its compliance with the apparently less onerous DTAs is unfortunate.

Unless such antics stop, we should not be surprised if we are eventually labeled a tax haven.

*TOC Note:

The reference for the requisite number of TIEAs to trigger compliance with OECD standards was cited in a Daily Telegraph article as well as a speech by the Bermudan Minister of Finance in the Parliament of Bermuda. TOC was unable to find independent corroboration of this requirement on the OECD website, and will be writing to the OECD for this verification.

Read also: G20 Summit – blacklisted tax havens face sanctions by The Telegraph.

The OECD tax havens’ listing of countries.


  • Ravi Philemon
  • Haven_not

    Actually those rich foreigners who parked their money here need not be in cash under banking secrecy laws. They can be in the form of other assets like property. That’s why you see high end property prices shooting into the stratosphere.

    Or they can invest in other areas like the leisure industry. Like Raffles Town Club was sold to a Chinese national in his 30s a few years back. Also few years back a new US$ billionaire listed by Forbes was a Chinese national in his 40s residing in SIngapore whose China property company was listed on SGX.

    Or they can invest in antiques, luxury cars and the like. These sectors used to do roaring businesse. For instance an Indonesian bought a crate of vintage wine for over $300K.

    With the opening of casinos the avenues for money laundering become even wider.

  • smallvice585

    Whitewashing blacklist? It is still a blacklist as long as sanctions are threatened for failure to comply.

  • jim

    The extremely close ties the Singapore Government has had with some countries might have been a factor for being included in this grey list – Lee Kuan Yew’s close ties with the Soeharto-era Indonesian Government and currently the mysterious alliance with Myanmar.

    As known worldwide, both countries are world-class in terms of money laundering.

  • despots share secrets

    Agree with jim @ 4)

    Doing business with the Burmese junta is understandable to some extent,
    but to honour them ?
    Isn’t it shere stupidity to advertise one’s sweetheart relationship with pariahs and thus allow others to make a case S’pore is a haven for money laundering ?

  • Dell

    I await the inevitable response — that the ‘West’ is out to ‘bait’ Singapore again…

  • kasdo

    byebye to our private banking industry haha

  • Retiree

    This is good -shows that Singapore is daring and creative to make money. Keep it up.
    Make more and the salaries can go up further.

  • Ganga

    Don’t mind me asking, has there been a change of tone on TOC? The articles don’t seem to be as hard-hitting anymore and appear to be more descriptive…

  • Chang Mai Tin

    Thanks to Choo Zheng Xi for
    assuring us that singapore is not yet blacklisted.

    Your article gives singaporeans a sigh of relief.
    Once again, my thanks for your effort.
    Great penmanship.

  • http://TOCSingapore Edward

    To: #9) Ganga & 8) Retiree

    I don’t mind Singapore being daring and creative in making money but not further increasing ministers’ salaries and bonuses. Why should we stifle their creativity?

    We should be hard-hitting when it comes to unfair tactics used to retard the growth of the opposition and to impose more restrictions on political and press freedom in Singapore.

  • Donaldson Tan

    At least we all can be sure that the G20 protests is not about paying more or less tax. I agree with smallvice585 that as long as the threat of economic sanctions remains, a greylist is still a blacklist. However, to demonstrate that it is indeed a blacklist or greylist, the threat of economic sanction must be proven to be real.

    During the previous 2008 G20 Summit in Washington, France and Germany wanted to clamp down on tax havens and regulate hedge funds. Finally, because of the extent of corporate bail-outs worldwide, the G20 finally decided to clamp down on tax havens to reduce the leakage of public funds to these tax havens.

  • theonlinecitizen

    Ganga (#9),

    The tone of the articles will be different from time to time because of the issues raised.

  • Yan

    Singapore will stretch the limit with the law as the money pouring to Singapore is helping it big time. Many Indonesian conglomerates (already convicted in Indonesia) can be found strolling in Orchard Road. I think as long as it is not drugs-related money, laundering is a good business that Singapore always welcome.

  • Hal

    Bah. Money laundering is the pretext in the hunt for lost government revenue in the global recession. The G20 are out now to redefine tax avoidance as tax evasion. Strong banking privacy laws are now conjured as criteria for tax havens. Singapore is in illustrious company – Switzerland, Liechtenstein and Luxembourg, key European financial centres are also targeted.

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