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Singapore
has agreed to share information with the US under a new law aimed at preventing
offshore tax evasion by American citizens.
The
city-state is one of Asia's biggest financial centres and is forecast to
overtake Switzerland as the world's largest wealth management centre.
It will
participate in the Foreign Account Tax Compliance Act (FATCA), which takes
effect on 1 July.
The move
provides a boost to US efforts to clamp down on tax-dodgers.
The US
intergovernmental agreement with Singapore was agreed "in substance"
and is set to be finalised by the end of the year.
It requires
financial firms to report information on US account-holders to the relevant tax
authorities.
More than 60 such deals have been negotiated, most recently with Indonesia, Peru and
Kuwait.
The US
Treasury Department said FATCA applied to US citizens who had more than $50,000
(£29,600) in their personal accounts.
Firms that
do not comply will face a 30% withholding tax on their US investment income and
could in effect be frozen out of US capital markets.
This
includes banks, investment funds and insurers, who will be required to
regularly report US citizens' financial information to the Internal Revenue
Service.
Prior to
any FATCA agreement, financial firms that reported information about their
account holders risked violating local privacy laws.
Tax
crackdown
There is a
rising amount of wealth being held in offshore financial centres in Asia.
According
to the Boston Consulting Group, there was $1.2tn in offshore wealth assets held
in Singapore and Hong Kong in 2012.
They have
benefited in part from a global crackdown on overseas tax evasion, which has
put pressure on traditional tax havens such as Switzerland.
Swiss
banking secrecy has come under scrutiny following several tax evasion scandals.
A US
congressional report released in February accused Swiss private bank Credit Suisse of helping more than 22,000 American citizens hide their wealth and
evade taxes.
It is one
of 14 banks under investigation by US authorities over allegations of aiding
tax-dodgers.
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