Singapore: Can its private banking hub survive?

Was it wise for Singapore to build the Marina Bay wealth management hub, given mounting public disquiet over tax havens?

Switzerland, the world's foremost and most prominent tax haven, has cut a deal with the Germans and the British to tax the deposits of nationals from those countries held in Swiss bank accounts. Other centres like Luxembourg, Monaco, Jersey, the Caymans, the Isle of Man and Mauritius are under increasing pressure to do likewise.

This co-incides with Warren Buffett, an American billionaire and other members of the 'enlightened rich' in France, Germany and the US calling for increased taxes to bring them more into line with the burden borne by ordinary folk. This is nothing new, as about "50 of Germany’s richest people have been campaigning for a higher top tax rate since 2009" reports the New York Times

Tax avoidance wheezes are commonplace; the wealthier people get the easier it appears to be to reduce tax liabilities. Something has to give.

The globally rising "Occupy" demonstrations have highlighted corporate greed, and the wealth management activities of tax havens will inevitably come more into focus. According to The Economist, "public anger and shareholder unease threaten tax havens’ tranquillity."

Marina Bay in Singapore is a major construction project on reclaimed land to the east of the Downtown Core. It enhances Singapore's global position as a financial centre, adding to its Shenton Way and Suntec financial districts. Standard Chartered, UBS, Credit Suisse and numerous others have established regional private banking hubs in the City State. And while other governments wonder how they will curtail the activities of bankers, Singapore is actively encouraging them. The country has "started its own special government school to train private bankers" reports The Economist.

Admittedly, Singapore had to find a financial services niche, as Hong Kong had already stolen a march on other Asian cities in the race to be that time zone's pre-eminent banking centre. And Singapore's rise has been meteoric, both physically as ever increasing numbers of skyscrapers are constructed, and in terms of the through-flow of funds as business is attracted away from traditional tax havens.

But can this last? 

Singapore has been criticised for legally enforcing safeguards against information-sharing agreements with other countries. The country might grow as a private banking hub for the time being, however. Bankers there will undoubtedly target increasingly wealthy mainland Chinese and others in the region. Also in their sights will be rich clients around the world, finding themselves compromised in Switzerland or the Isle of Man (which automatically swaps information).

The City State has managed to plough its own furrow in numerous ways over the past half-century. However, whether it will be able indefinately to withstand the clamour for tax justice from the increasingly squeezed peoples of the world remains to be seen.

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