Singapore and Hong Kong are emerging as preferred destinations for offshore fund placement, whereas Switzerland, once a tax haven leader, is losing its prominence in the field. Offshore real estate investments, like in Dubai, are a growing tax evasion practice.
The EU Tax Observatory, a research laboratory hosted by the Paris School of Economics, conducted an extensive study funded by the European Union on global tax evasion, analyzing its scope and proposing solutions to curb it.
Global financial assets held abroad now stand at approximately 12 trillion dollars. Previously managing 50% of the world’s offshore assets before the subprime crisis, Switzerland now oversees only 20% of these funds.
In 2007, Switzerland was renowned as a tax haven, where over 90% of accounts and assets belonging to foreign clients remained undisclosed to tax authorities.
However, evading taxes in Switzerland has become increasingly challenging due to the introduction of the Common Reporting Standard in 2017, facilitating the automatic exchange of banking information among over 100 participating countries to the country’s tax authorities.
Currently, a quarter of offshore funds elude Swiss authorities’ scrutiny, a significant drop from the 90% evasion rate in 2007. Certain financial institutions intentionally conceal these offshore assets to retain their loyal clientele.
The study identifies new tax evasion practices, such as offshore real estate investments. For instance, 25% of offshore monetary funds in Dubai have been converted into real estate to bypass taxation and the Common Reporting Standard.
Wealthy individuals are now opting to create accounts and invest their funds in Asia, where tax benefits — either for individuals and and corporations — surpass those offered in Switzerland. Singapore and Hong Kong emerge as the favored destinations for the wealthy to safeguard their assets.
Yet, Singapore and Hong Kong also adhere to the Common Reporting Standard, mandating a minimum level of transparency regarding the fiscal activities of companies within their jurisdictions. This commitment bolsters their international standing as transparent hubs and gateways to Asia.
Singapore offers a relatively favorable taxation on investments, attracting numerous corporations. Contracts can also be signed to reduce significantly or even exempt companies or individuals from tax obligations.
The study proposes a global 2% tax on billionaires and increasing taxation for wealthy individuals residing abroad, thereby minimizing their tax advantages, to combat persistent tax evasion.
