A joint statement issued by the United States and Singapore suggests that US authorities are seeking to accelerate off-shore tax enforcement aimed at US accountholders and financial institutions in Singapore.
A joint statement was issued on 2 August 2016 to coincide with Singapore's Prime Minister Lee Hsien Loong's state visit to the United States, announcing the two countries' commitment to negotiate and sign "as soon as possible with the aim of doing so by the end of 2017" a reciprocal intergovernmental agreement ("IGA") and a Tax Information Exchange Agreement ("TIEA"). The TIEA in particular would provide an avenue for US authorities to seek account information held by financial institutions in Singapore otherwise protected by Singapore's strict bank secrecy laws.
As stated in an interview provided earlier this year by Acting Assistant Attorney General Ciraolo, the US tax enforcement authorities are in the process of wrapping up the Swiss Bank Program which was aimed at US related accounts held in Switzerland, and are increasingly looking towards other off-shore jurisdictions including Singapore. In her interview, AAAG Ciraolo confirmed that the DOJ's Tax Division was analysing the information received from Swiss banks and was identifying jurisdictions and financial institutions to which funds have been transferred (commonly referred to as "leaver" funds). In an earlier e-bulletin we reported on the summons issued against an international bank in the United States courts aimed at obtaining account information held in relation to a Singapore account in Singapore. The information was eventually provided based on the customer's consent. The summons highlighted the fact that the DOJ was turning its attention to Singapore and that it was determined to "pierce" Singapore bank secrecy.
The mention of a speedy negotiation of a TIEA is further evidence that the United States is getting ready to pursue US accountholders and financial institutions located in Singapore within a fairly tight time frame.
A bilateral TIEA would allow the authorities in Singapore and the US to exchange relevant information on request and to compel financial institutions located in Singapore to provide that information with a view to enforcing US tax laws. Presently, the options for obtaining account information from Singapore are limited due to a combination of strict secrecy laws and a lack of tax information exchange agreements or treaties between the US and Singapore:
- The current IGA signed by Singapore in relation to FATCA which came into effect on 28 March 2015 is unilateral and provides for the automatic sharing of limited account information from Singapore to the US going forward, but does not cover historical information.
- The mutual legal assistance route through Singapore's Mutual Assistance in Criminal Matters Act (MACMA) applies only narrowly to the US in the absence of a Mutual Legal Assistance Treaty; this means that limited information may only be exchanged on request where criminal proceedings have already been commenced against the alleged tax evader.
- Although Singapore has signed the OECD Convention on Mutual Administrative Assistance in Tax Matters (the "Treaty") on 29 May 2013, and the Treaty entered into force on 1 May 2016, the United States, which also is a signatory (27 May 2010), has not ratified the Protocol to the Treaty, which means that that agreement is currently not available for the exchange of information between Singapore and the United States.
Unlike the ratification of the Treaty which requires approval in the Senate, a TIEA is not viewed as a tax treaty that requires advice and consent by the Senate; rather, it is an administrative agreement that can be signed by a member of the executive branch which means that it is more easily passed.
The United States' intention to put a TIEA in place by the end of 2017 fits in with the statement made by AAAG Ciraolo that it was not prudent for financial institutions to wait for the announcement of another deferred/non-prosecution program similar to the Swiss Bank Program and that it was important for financial institutions to approach the DOJ in a timely manner before the DOJ took action against the financial institution based on information collected under the Swiss Bank Program.