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Singapore and US reach tax evasion deal

Singapore financial center Image copyright AFP
Image caption Singapore has one of the world's highest concentration of millionaires

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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