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SINGAPORE : More companies could set up operations in Singapore and Hong Kong as they seek to avoid being tarred by less reputable tax jurisdictions.
This comes as US lawmakers seek to clamp down on American citizens with undeclared assets around the world.
Tax havens are popular with wealthy individuals seeking to park their assets.
While some assets are clearly legitimate, there is also a perception that some funds could be channelled to tax haven for dubious reasons.
And some companies with operations in places like the Cayman Islands or Mauritius are seeking to avoid being tarred with the same brush as those that may be seeking to dodge taxes.
"So what we are seeing is major corporations taking the view that they don't want to be associated with locations that don't have the right reputation... And to be honest, places like Singapore and Hong Kong will benefit from this flight to quality," said Steve Towers, tax partner with Deloitte & Touche LLP.
Observers said Singapore and Hong Kong offer more than just low taxes for a holding company, but facilities to support full managerial staff at low costs.
Large multinationals with interests in Asia are the most likely to take notice.
Tax havens have come under greater scrutiny in recent months, especially with the US cracking down on the tax owed by its citizens overseas.
Experts said this is spurred by the dip in tax revenue from companies since the onset of the global downturn.
"I think this is definitely related to the economic crisis. Governments have been spending a lot of money, and they need to try and balance that up with revenue. And if the corporate taxes are not there because their revenue base has gone, then individuals remain and indirect taxes remain. So, what I see with the US government at the moment is that they are tightening the reins," said Grahame Wright, tax partner at Ernst & Young LLP.
Some observers expect that once companies begin to move offshore, they could see resistance from governments eager to retain their tax revenue, which could become a source of taxation friction for some time to come. - CNA /ls
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