Aussie firms target S'pore in quest for lower taxes

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I wonder is that the reason why our sg's gdp and inflation are so high in recent years?

Sunday, May 11, 2014
Jonathan Pearlman
The Straits Times

Australia, ramping up efforts to combat tax havens, has released for the first time information showing where companies shift revenues - and Singapore is at the top of the list.

Analysts said the list published by the Australian Taxation Office (ATO) last week appeared to be part of a "scare campaign" to stop multinationals from shifting profits to countries with lower tax rates.

The list showed that of about A$130 billion (S$152 billion) that left the country, almost A$40 billion went to Singapore. This was followed by Japan and Britain with A$14.8 billion each, the United States (A$11.8 billion), Germany (A$7.6 billion) and Ireland (A$7.5 billion).

The ATO told The Straits Times that the data was "not a complete, all-inclusive figure" but was based on information from companies which reported the top three nations to which they shifted funds.

"It is important to note that havens can be transit points in a transaction and are not always where the money ultimately lands," it added.

Asked about the figures, a spokesman for the Inland Revenue Authority of Singapore (Iras) told The Straits Times yesterday that it was unable to comment on their accuracy.

The ATO spokesman said Australia began to ask for more information from companies and international agencies on the use of tax havens in the past two years, resulting in the collection of an extra A$450 million.

Dr John McLaren, an expert on international tax havens from the University of Wollongong, said the tax data did not indicate companies were acting illegally but was part of efforts to publicly pressure them over minimisation strategies.

"I think it is a scare campaign - just to scare people and to be seen to be doing something and tracking the tax flows," he said.

The release of the data was followed this week by Australian federal tax commissioner Chris Jordan's warning that the government was losing more than A$1 billion a year due to international tax minimisation strategies.

Australia is heading the Group of 20 (G-20) major economies this year and has signalled that one of its top priorities will be addressing international tax havens and weaknesses in the way multinationals are taxed.

During a G-20 meeting in Sydney in February, Australia's Treasurer Joe Hockey called for a "global response". "Some multinational companies aren't paying their fair share of tax anywhere," he said.

Google has come under particular attack in Australia, where its tax bill last year came to about 15 per cent of its profits of A$46.5 million, with the company billing customers in Singapore to reduce taxes. Singapore's corporate tax rate is 17 per cent, compared with 30 per cent in Australia.

The tax office said Australia, along with the G-20 and the Organisation for Economic Cooperation and Development, was pushing for automatic exchange of taxpayer financial account information between countries.

The release of the data comes as Singapore this week agreed to give the United States data on certain Singapore bank accounts held by US persons to help the authorities there combat tax evasion.

The Iras spokesman said there is no basis to allege that Singapore is a tax haven.

"Singapore is a responsible jurisdiction with a strong rule of law and our vibrant economy is built on the real and substantive manufacturing and service sectors. By maintaining a fiscally prudent regime, we are able to keep our tax rates competitive while raising sufficient tax revenues to fund our public expenditures," Iras added.

Dr McLaren said he believed a lot of the funds shifted by Australian companies to Singapore was to "captive insurance" companies, or subsidiaries set up to insure the parent.

He said the parent companies can reduce their tax burden by having the insurance arm based in Singapore, which has lower tax rates.

The data also showed that Singapore was the second-biggest source of offshore capital inflow to Australia. Of about A$103 billion received by Australian firms in 2012, A$35.6 billion came from Switzerland, A$12.3 billion from Singapore and about A$10.3 billion each came from the US and Britain.

The ATO told The Straits Times that it released the data because "2011-12 was the first financial year that this information was collected".

Mr Mark Zirnsak, from the Tax Justice Network, said Australia needs to crack down more aggressively on "tax dodging", particularly by ensuring greater transparency and reporting by companies.

He said that "progress was being made" and bodies such as the G-20 should continue to push for greater sharing of information.

"Singapore is one of the places that Australian companies have used for that purpose," he said. "Some of it is legitimate - the question is what part is legal tax dodging, or not."

Dr McLaren, however, said it was all but impossible to prevent multinational companies from legally minimising tax.

He said Australia should focus instead on taxes that are harder to avoid, such as wealth taxes and land taxes.

"You have Joe Hockey in the G-20 making lots of noise but there is no way you can ever stop multinationals reducing their taxes," he said.

This article was published on May 9 in The Straits Times.

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