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Singapore-what impact is the EEC tax evasion regulation making?

Saturday 16 August 2008 by

Although it faces increasingly stiff competition from other financial centres in the region, Singapore has been identified by many analysts as the jurisdiction of choice to replace Switzerland in the coming years. In a bid to remain competitive and attractive over its counterparts in the region - and above and beyond its socio-political stability, sound infrastructure and well-regulated financial sector - the Singapore government has enacted the Trustees (Amendment) Act 2004 and amended the Trust Companies Act and the laws relating to income tax and estate duty.

As an Asian and international banking hub, an investment and wealth management centre, the world's fourth-largest foreign exchange centre and an emerging Islamic finance centre, Singapore is in many respects ideally suited to the job. In addition to its common-law heritage, its territorial and remittance-based tax system and its range of double-tax treaties, its international credibility and reputation as a compliant jurisdiction is well substantiated.

Nevertheless, although it serves all of the above for business entities and high net worth individuals, can Singapore's infrastructure really cope with the proposed inflow of new business? Given that it is a relatively small city-state with a well-documented low birth rate, how does the government expect to support this anticipated growth?

Singapore has answered this question emphatically on a number of fronts.

Opening the gates to immigration is fundamental. Because of that flagging birth rate, and in order to remain competitive in the region and globally, the government is welcoming multinational corporations, and aims to admit up to one million foreigners - well educated, ambitious and wealthy - to live and work there. The government of Singapore has a very progressive policy when it comes to attracting foreign talent into the country, especially as far as skilled workers, professionals, middle-level skilled workers and entrepreneurs are concerned. They must do so to supplement the country's internal capacity if they are to maintain its leadership position in a number of sectors, especially finance. To support this policy, the government offers a number of visas including the Professional Visit pass, Employment Pass, S pass and Work Permit.

In spite of its new open-immigration policy, efficient government, first-world infrastructure, sound educational system and clean, safe streets, Singapore has not always been seen as an exciting place to live and work.

The wheels of change are already in motion - and Singapore's image has been given a fresh, cosmopolitan new look. Indeed, according to Lee Kuan Yew, Singapore's former prime minister, the city aspires to be a 'tropical version of New York, London and Venice' all in one. Plans to give the republic this facelift are well under way: the financial district will have a striking new skyline, while there are no plans for hotels, casinos, a new theme park and super yacht marina to spring up in the city. Singapore also hosts a Formula One Grand Prix. The city's revitalised waterfront, not far from the growing financial district at the mouth of the Singapore River, will be a veritable playground for hard-working bankers, lawyers, accountants and professionals, not to mention the proposed influx of tourists.

After the Asian financial crises of 1997, the government set about creating policies to generate higher-paying white-collar jobs in sectors such as private banking and finance - indeed, Singapore is becoming the largest focal point for private banking outside Zurich, with assets rising by 20% annually in recent years.

But where will the people needed to support and enable this growth actually come from? The demand for already limited human resources is high, and this is one of the biggest obstacles faced not only in Singapore but in the broader region and globally. Globalisation has vastly increased the opportunities within the financial service sector - with an upwardly mobile, well-educated, cosmopolitan and multi-cultural workforce capable of switching between jurisdictions with relative ease.

Singapore has the economic and intellectual resources to compete at the highest level and, importantly, the will and ability to fast-track its development through government and regulators who are in communication with industry professionals. This has been shown in the revised trust laws mentioned earlier and also in the rapid growth experienced in the guest workforce - a phenomenon not seen in other offshore financial centres, which are hampered by strict immigration and affirmative-action policies.

However, this increase in foreign workers is not without its inherent problems. With an average influx of 100,000 expatriate workers annually; there is some local anxiety over the government's efforts to boost immigration. Some Singaporeans fear losing their jobs to foreign professionals, and that the open-door policy will not necessarily translate to more jobs. Many are expressing their concerns about how Singapore's island and infrastructure will support the increased population and subsequent pressures on transportation, housing and education.

The strong tradition and ethic of learning and progress has also been embodied here with the recent establishment of world-class seats of learning such as John Hopkins University and INSEAD Singapore campuses.

If Singapore can invest in the education and continued professional development of native Singaporeans while bolstering its growth with talent from abroad, then the territory has a place at the top table and a bright future ahead.