CRS/AEOI Strikes: Singapore & Australia Will Exchange Banking Info.

National Australia Bank, Queen St. implements CRS/AEOI

Effective 1 July, 2017 Australians in Singapore and Singaporeans in Australia will find their tax information is now being shared with their home governments [via CRS/AEOI], or rather, the countries in which they are “tax residents”.  Australia has taken what is referred to as the “wide approach” [to CRS/AEOI] which means that up front the financial institutions will be asking their customers to list all of the countries in which they are tax residents and will report this information to the Australian Tax Office (ATO) along with the tax information.  The ATO will make a determination as to whether this information will be shared with any particular country, but it will not be up to the financial institution to make this determination.

Under CRS/AEOI in Australia, there is no minimum account balance required for reporting… i.e. if the account exists, it will be reported. This affects not only Australians and Singaporeans, it also affects Americans with accounts in Australia as, for ease of implementation, the ATO has decided the apply the same rules to FATCA (the one-way reporting of American accounts to the US IRS) as it applies to CRS in terms of financial institution reporting.  Financial institutions aren’t required to apply the CRS guidelines but it is anticipated that they will do so voluntarily in order to ease their own regulatory burden. If misery loves company then Aussies and Singaporeans will probably cheer the joining them in their pain.

To be clear, the ATO has classified the following types of organisations as financial institutions:

  • a Custodial Institution
  • a Depository Institution
  • an Investment Entity
  • a Specified Insurance Company
  • certain Trusts

The ATO has issued these guidelines which, although intended for financial institutions, can be useful for individuals trying to control their tax exposure resulting from CRS/AEOI. If you think that you may have any tax exposure in Australia, you should read through the guidelines; you may find that you are less (or more) exposed than you think.

A Feast for Cynics – BEPS, Indonesia & Planetary Destruction

Singapore before, during and after 2013 haze
© By RectorRocks (Own work)
Governments make a great deal of hue and cry about punishing miscreants for their evil misdeeds. Then then one sees how mild the punishments are for gross misdeeds. Of course cynicism has a way of popping out all over. We see this in the mix of BEPS, Google’s tax avoidance, the destruction of Indonesia’s forests and peatlands and the Singapore government’s ineffectual response to the consequences.

Does anyone actually believe that the Indonesian government cares one whit about the planet-destroying pollution that pours out of its country each year like clockwork?  Jusuf Kalla figuratively told everyone to simply shut up and hold their breath. As Vice President, he presumably has some standing but his only real sin was saying what “leaders” all over the region actually think. “Just hold your breath.”

Singapore Deals with World-Destroying Haze

Take for example Singapore’s much-publicised Transboundary Haze Pollution Act.  With a possible fine of SGD 100,000 per day of transgression, it seems like it might have some impact… but then, built right into the law is a cap of two million dollars!  This is getting serious?

It has taken five companies to task but not to court: Asia Pulp and Paper, Rimba Hutani Mas, Sebangun Bumi Andalas Wood Industries, Bumi Sriwijaya Sentosa and Wachyuni Jandira.

One would think that the revised expectation of a two meter rise in sea-level by 2100 would have the legislature in low-lying Singapore up in arms about this. After all, Indonesia is one of the world’s major CO2 emitters, thanks to its endless fires.

In the case of Asia Pulp and Paper, their 2015 consolidated net income in 2015 was SGD 222.7 million.  Had they actually been fined in Singapore, the worst they could have expected to be fined was less than one percent of their net income… and no jail time.

On the other hand, if one of their executives was caught for the second time using a mobile phone while driving he would pay SGD 5,000 and could be imprisoned for up to two years. That’s a real disincentive  And he would pay.  So far as I can determine, none of the five companies above nor any of their officers have received any punishment yet.

For the record, the published net income that Asia Pulp and Paper reported may be the tip of the iceberg;  they have a network of distributors and finance companies domiciled in the Netherlands, Mauritius, the Cayman Islands and the British Virgin Islands.

If they are punished at all by the Singapore government, it will amount to a one-finger slap on the wrist.  Vivian Balakrishnan’s quiver seems quite empty of arrows. The wise man speaks softly but carries a big stick. Singaporean legislators might consider giving the NEA a decent-sized stick with which to do its job. The problem is a knotty one, but one can’t even say that the first step towards solving it has been taken in Singapore.

BEPS Targets Google as Google Targets Indonesia

But the real subject of this piece is Google.  Although fewer people are affected by Google’s creative basing of its profits than are by Indonesian haze, Google provides us with a good example of why so many governments are up in arms over Base Erosion and Profit Shifting (BEPS).

Google operates in Indonesia as it does in the rest of the world – it sells advertising and books profits from the advertising.  It maintains a small office in Indonesia which, it says, is there for managing its conferences in Indonesia. It pays the office for the costs associated with the conferences plus an eight percent markup to cover the cost of operating the office.  That, it says, is in accordance with the law.

“Foul” cries taxman Muhammad Haniv.  This is unethical. It’s immoral, he says.  Ah, but this is business and we all know that there’s no place in business for morality and ethics.  The question is, is it legal?  And Google contends that it is.  So all those beautiful Indonesian advertising revenues show up in Singapore where, surprise of surprises, the tax is much lower than in Indonesia.

Indonesia Destroys the Earth While Google Walks Away with its Taxes

Mr Haniv quotes estimates that Google Asia Pacific’s total revenue from Indonesia last year may have been as much as USD455 million, generating some USD152 million in profit. He estimates that Indonesia has lost out on some USD 76 million in taxes. Those $76 million could certainly have been steered to the companies that are burning the country down in order to persuade them to stop their planet-destroying pollution. Could have, but most likely would have found its way into someone’s “charity” and nothing would have changed.

And… what’s Haniv doing about it?  Have the tax laws been changed? Does he have a cudgel to bring Google into line?  Nope.  Haniv has his headlines and apparently that is all he can do. The folks who really run things, the ones who keep the haze billowing, are quite happy with the status quo.  Their personal “charities” are probably full of Google stock.

It’s enough to make me a cynic.

Frans Bouman


China’s Property Market WILL Crash… and Soon!

Shanghai Buildings
© jiang-wen-jie

Since April 2015, the property price in China has grown fast, and the trading volume per month and price YoY growth rate have broken all previous records by significant margins. This market rally is the strongest in the 18-years long bull market of China’s housing market. Housing market speculation has become the talk of the town so much so that people would give up their own business or jobs for it.
However, the real picture of China’s economy couldn’t be more depressing apart from the red-hot housing market: the GDP growth rate has fallen steadily towards the historical lows since “Reform & Opening up”; the export values (rolling 12 months) year-over-year growth rate has declined for the past 6 years and arrive at the level last seen in the aftermath of the 2009 global financial tsunami. If we ignore the above facts, the period since April 2015 would be seen as the most prosperous in China’s history and the housing market at its on record. China’s housing market is truly reminiscent of Pompeii right before A.D. 79.