Organisation For Economic Cooperation And Development (Singapore On The 'Grey List')

Date: 28 May 2009

Question No. 5 (by Ms Sylvia Lim, Non-Constituency Member of Parliament):

To ask the Minister for Finance (a) what steps does the Government intend to take to remove Singapore from the ‘grey list’ of the Organisation for Economic Cooperation and Development as a country committed to the internationally agreed tax standard but which has not yet substantially implemented it; and (b) what are the implications of such steps on the economy.

Reply by Finance Minister Tharman Shanmugaratnam:

Singapore was placed by the Organisation for Economic Cooperation and Development – or the OECD for short – on its so-called ‘grey list’ with regard to international cooperation on exchange of information on tax matters in early April. This is a list of jurisdictions that have committed to the OECD Standard on Exchange of Information (EOI) but have not yet substantially implemented the Standard. Several other financial centres such as Hong Kong and Switzerland are in the same situation as Singapore in this regard.

We discussed this issue in Parliament in February this year, and the Government gave clear indication of its intention to endorse the OECD Standard. We decided to do so as the OECD Standard had become an internationally accepted benchmark following its endorsement by the UN Committee of Tax Experts (on International Cooperation in Tax Matters) in October 2008.

In March 2009, we announced that we will introduce relevant amendments to our domestic tax regime, as well as renegotiate and conclude Avoidance of Double Taxation Agreements – or DTAs for short – to enable tax cooperation in line with this new internationally accepted Standard. The OECD recognises Singapore’s intention to do so. It has also made clear that it does not regard Singapore as a tax haven.

We are working on the draft legislative amendments. They will be aired for public consultation in the middle of the year, before we proceed to introduce the amendments in Parliament.

But I would clarify that even before the endorsement of the new international Standard, Singapore has already been able to offer prompt assistance on most requests for information from our 60 DTA partners. We will amend our laws to enhance the information that we can exchange under our DTAs. In particular, the amendments will enable IRAS to assist on requests from our DTA partners for information where Singapore does not have a domestic tax stake or interest in the request at hand. Similarly, our tax authority can obtain the assistance of our DTA partners on information which they do not have a domestic interest in.

Naturally, any request by a foreign jurisdiction for information has to be clear, specific, relevant and backed with good reason. This is in line with the new international Standard, which allows the requested country to screen off requests that are frivolous or spurious in nature – otherwise known as “fishing expeditions”. The OECD itself has emphasised that such “fishing expeditions” are out of scope. Banks cannot serve to harbour financial criminals, but they are equally held accountable to their clients in ensuring that confidentiality cannot be lifted without justification.

In tandem with the legislative changes, Singapore is starting talks with several countries to update our DTAs with them on a mutually beneficial basis, including having exchange of information provisions that are in line with the new international Standard.

Other financial centres such as Hong Kong, Switzerland and Luxembourg have announced similar plans. It is important that all jurisdictions make similar moves, so as to enable international cooperation on the matter while preserving a level playing field amongst financial centres.

The steps that we are undertaking in the coming months are in line with Singapore’s status and reputation as a trusted and responsible financial hub. Singapore does not and will not stand for the abuse of its laws to shelter financial criminals and their ill-gotten proceeds.

What defines Singapore as a competitive financial and business hub are its longstanding strengths – an open and transparent governance regime, a reputation for the rule of law, and a pro–business environment. Unlike tax havens, we are a substantive and diversified economy, with manufacturing, services and financial sectors reinforcing each other and reaching out to a wide geography of markets. We will continue to enhance these strengths going forward.