ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT

ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT:

(Singapore on the 'grey list'): 4.

Ms Sylvia Lim asked 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.

The Second Minister for Finance (Mrs Lim Hwee Hua): Sir, Singapore was placed by the Organisation for Economic Cooperation and Development (OECD) 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 then 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 (DTAs) 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.

Sir, we are working on the draft legislative amendments and 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 the Inland Revenue Authority of Singapore (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.

Sir, 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.

Ms Sylvia Lim: Sir, supplementary question for the Minister.

Could the Second Minister enlighten the House as to why Singapore only committed this year to adopting the international tax Standard. When we look at the list of countries in the OECD list, that are in the white list, the countries are very diverse, including countries like China, Mexico, Turkey and so on. So could the Second Minister tell us why we only committed to it this year and could she also give an estimate as to when she expects that we will be able to move into the white list? ****

Mrs Lim Hwee Hua: Sir, as a small open economy and financial centre, we need to be nimble and the recognition of this Standard is an acknowledgement that the world has changed and Singapore has never stood still. We continue to review all these changes and it is triggered really by the October 2008 move, or rather by the milestone, when the Standard was recognised as an internationally agreed benchmark by the UN Committee of Experts so there is broader recognition of that Standard.

And in terms of when we will get onto the white list, basically as I have mentioned in my reply, the intention is to air for public consultation the legislative changes and at the same time we will work with our DTA partners on the changes for each treaty.

Mr Speaker: Ms Lim, the next question.