Singapore's Implementation of Global Standard for Automatic Exchange of Financial Account Information
Date: 3 November 2014
Parliamentary Question by Mr Yee Jenn Jong :
To ask the Deputy Prime Minister and Minister for Finance about the new OECD Standard for Automatic Exchange of Financial Account Information: (a) whether Singapore has committed to implementing the Standard; (b) if so, what is the time-table for implementation and the likely impact on Singapore’s financial services institutions and other organisations; and (c) what will be the effect on Singapore as a financial hub.
Reply by DPM and Finance Minister Tharman Shanmugaratnam:
The Non-Constituency Member Mr Yee has asked for the Government’s position on the OECD Standard for Automatic Exchange of Information and its impact on Singapore’s financial institutions and other organisations. I will provide some background on the Standard for the benefit of members who may not be familiar with this matter.
Automatic Exchange of Information, or AEOI in short, refers to the regular exchange of information between jurisdictions for tax purposes, with the objective of detecting and deterring tax evasion by taxpayers through the use of offshore bank accounts. The information covered is of a pre-defined scope, and typically pertains to information relating to accounts maintained by taxpayers in financial institutions located in a jurisdiction outside of their own.
There is a growing international move towards use of AEOI in tackling offshore tax evasion. Last year, we amended the Income Tax Act to allow Singapore to exchange information with the US in order to help our financial institutions comply with the Foreign Account Tax Compliance Act (FATCA). In effect, FATCA is a form of AEOI as the IRAS will exchange agreed items of information obtained from our financial institutions, with the US Internal Revenue Service.
In 2013, the Group of Twenty (G20) major economies asked the OECD to develop a single global standard to simplify the implementation of AEOI between jurisdictions. The Standard, modelled closely after the US FATCA, is expected to be endorsed by the G20 leaders later this month at the G20 Leaders’ Summit.
The Global Forum on Transparency and Exchange of Information for Tax purposes, of which Singapore is a member, has endorsed AEOI as a global standard and asked all members to commit to a timeline of 2018 or earlier for implementation. More than 90 jurisdictions, including major financial centres such as Switzerland and Hong Kong, have endorsed the Standard, and indicated target implementation timelines of either 2017 or 2018.
Singapore has a zero-tolerance policy on illicit funds, and is fully committed to implementing relevant international standards to ensure that such funds have no place in our financial system. In line with this policy, we have decided to implement the OECD AEOI Standard by 2018, with the following conditions:
a) First, there must be a level playing field among all major financial centres, including Hong Kong, Dubai, Switzerland and Luxembourg, to minimise regulatory arbitrage;
b) Second, we will only engage in AEOI with jurisdictions that have a strong rule of law and can ensure the confidentiality of information exchanged and prevent its unauthorised use. This is particularly important as AEOI entails the transmission of sensitive taxpayer information which should be safeguarded;
c) Third, there must be reciprocity with any future AEOI partners in terms of information exchanged.
These conditions are necessary to make sure that we continue to respect legitimate expectations for taxpayer confidentiality, as well as ensure that AEOI is effective in tackling offshore tax evasion. It should also not result in fund flows to less-regulated jurisdictions.
We are mindful that implementing the OECD AEOI Standard will impose costs on our financial institutions and government agencies. Financial institutions may need to institute new procedures for customer due diligence and set up systems to comply with new reporting requirements. The Government will work closely with the financial industry to address issues that may arise as we work towards implementing the new AEOI Standard by 2018.
Singapore’s continued success as a financial hub depends on maintaining our reputation as a trusted and responsible financial centre. This means adhering to international standards, including AEOI, that enable us to strengthen our framework for international cooperation to combat cross-border financial crime.