Switzerland retains top spot in financial secrecy index [Cayman is 4th]
From The Times of India
Switzerland, retained its top spot in the financial secrecy index (FSI), unveiled by the Tax Justice Network on November 7. It was followed by Luxembourg, Hong Kong, Cayman Islands and Singapore.
This ranking is based on a combination of a country’s secrecy score and a scale weighting based on their share of the global market for offshore financial services.
Thus, for instance, even though Mauritius had a secrecy score of 80 as it accounts for less than 1% of the global market for offshore financial services it was ranked lower at 19, against Singapore which had a lower secrecy score of 70 points but was ranked at fifth position on the FSI.
“A secrecy jurisdiction provides facilities that enables entities escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool,” states Tax Justice Network (TJN) which is a group lobbying for greater transparency in offshore financing.
TJN uses 15 indicators for computing the secrecy scores which include banking secrecy, disclosure of company ownership, maintenance of records of local trusts and foundations, exchange of information, anti-money laundering legislations, etc.
From India’s perspective, if one analyses the top investing countries, countries that are perceived to be non-tax havens also rank high on FSI. While Mauritius is the top investing country when it comes to foreign direct investments ( FDI) into India, those next in rank are Singapore, UK, Japan and USA and these have an FSI rank of 5, 21, 10 and 6 respectively.
Among the top ten investing countries into India, Mauritius, UAE and Switzerland have a secrecy score of more than 70, with Singapore scoring an exact 70.
County-specific analysis done by TJN indicates that Mauritius does not prevent trusts or private foundations, it permits harmful legal vehicles and company ownership details are not publicly available. For such analysis information as on December 2012 was used, and Mauritius experts say that additional norms issued by recently by its Financial Service Commission will dilute secrecy conditions and improve its standing.
As regards Singapore, the analysis refers to the existence of Private Trust Companies which allows for greater secrecy and also the favourable tax policies. “There is full tax exemption for foreign-sourced income received in Singapore by any individual not resident in Singapore; there is an absence of capital gains, gift or estate taxes; and Singapore also boasts a quasi-territorial tax system that exempts from individual income tax all foreign-sourced income not remitted to Singapore,” points out the TJN’s analysis. This, together with the existence of tax treaties, has made Singapore a major turntable for so called round tripping into and out of India and other countries. UK is the third largest investor into India and TJN’s analysis states that it is the most important global player in the financial secrecy world. While the UK itself ranks only in 21st place, it supports and partly controls a web of secrecy jurisdictions around the world, such as Cayman, Bermuda, Jersey and Gibraltar.
“Tax transparency is being given its due importance in India. The Indian government has entered into tax information exchange agreements with tax havens – such as Cayman or British Virgin Islands (with whom it does not have a tax treaty) and it has broadened the scope of the exchange of information article contained in tax treaties. Recently it notified Cyprus as a notified jurisdictional area, as required information was not forthcoming from Cypriot authorities. Substance over form is gaining importance in all countries, including India”, says Sudhir Kapadia, partner and tax head, EY.
India itself has been assessed on the FSI scale with a rank of 32 and secrecy score of 46 (placing it in the lower mid range of the secrecy scale). India could improve on transparency as regards company ownership with such details being available publicly and even online.
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