The US Taxman Cometh to Singapore (and everywhere else)

Headliner from Business Times on “The US Taxman Comes Knocking On Asian Doors”, Sept 9:

Thousands of American taxpayers in Asia are facing a Sept 23 deadline to disclose their undeclared offshore assets as the US government steps up its drive against non-compliance.

The IRS is obviously not retrenching. Obama is making good on his election promise.

The US government has been ramping up efforts to go after undeclared offshore assets of US taxpayers, including hiring an additional 800 dedicated agents and transferring a number of other agents from corporate and tax treaty departments to work on these files.

‘This initiative is further evidence that the Obama administration is taking very seriously the loss of tax revenues through offshore tax evasion, and that the US government will be working vigorously to obtain information with respect to non-US accounts owned by US persons living abroad,’ said David Sandison, tax partner, PricewaterhouseCoopers Services LLP.

September 24 may mark the day when a few expats in Singapore find themselves legally recognized as felons. And in case you are wondering, yes, there is a Singapore-US extradition treaty:

On March 23, the IRS issued new guidelines for voluntary disclosure, valid for six months, a sort of amnesty which standardised the tax and penalty regime for those who came forward.The six-month amnesty, which expires on Sept 23, caps liability at six years of back taxes, interest and standardised penalties.

Crucially, those who come forward voluntarily can avoid the risk of criminal prosecution.’US taxpayers in Asia should understand that, if they have undeclared offshore accounts, their chances of being prosecuted by the US government will increase significantly after the Sept 23 deadline passes. In addition to the financial penalties they may face, those who have not complied also risk being arrested on entry when they visit the US.

Readers may recall an earlier post on whether Singapore is a tax haven, and consider the fact that more than US100B in US direct investments have been pumped into Singapore in 2008, most of them into holding companies.

And just for the record, Singapore currently has only six EOIs (exchange of information) signed – but not with the US yet. That day can’t be too far off. While Singapore and Hong Kong may spin try to spin the US EOI positively (see below), the fact is, they have little choice.

In Asia, both Singapore and Hong Kong have indicated a willingness (just like the Swiss were “willing” to release the 4400?) to implement exchange of information agreements. Once these agreements enter into force, it will make it far easier for other nations, such as the US, to obtain information on account holders in these jurisdictions.

And just for the record, the six Singapore EOI agreements are with:

Belgium, New Zealand, UK, Denmark, the Netherlands and Australia.

ADDENDUM: Monaco has just caved and signed a EOI with the US (announced just hours after this posting.) Will we be treated to news of famous Hollywood stars being manacled at LAX as they step off the plane? Stay tuned!

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