06/07/23

SINGAPORE: After Being Named In Hindenburg Report, Singapore To Change Tax Laws That Attracted Super Rich

As published on: indiatimes.com, Thursday 6 June, 2023.

Nearly six months after Hindenburg research's report came out and rattled the Adani group, the effect still seems to be echoing in many parts of the world. The US-based short seller's report that came out in January, had also mentioned Southeast Asia's island nation Singapore.

Hindenburg research's report, which had accused the Adani group of stock manipulation and accounting fraud, had also mentioned: “Vinod Adani (Gautam Adani's brother), through several close associates, manages offshore shell entities in Mauritius, Cyprus, the United Arab Emirates, Singapore, and several Caribbean Islands." 

Vinod Shantilal Adani has over the years expanded his commodities portfolio to Singapore, according to advertorials published about him in the Indian press seven years ago. Vinod had reportedly moved to Singapore briefly before relocating to Dubai where he made his fortune in trading sugar, oil, aluminium, copper and iron scrap. 

With pressure mounting amid the allegations, rising scrutiny regarding Adani group's offshore transactions had resulted in Vinod Adani stepping down as director of three foreign companies— Carmichael Rail and Port Singapore, Carmichael Rail Singapore and Abbot Point Terminal Expansion - connected to the family's coal mines in Australia, in late February.

It seems that Singapore is now taking steps towards clearing its image after being named in Hindenburg's report earlier this year. The Monetary Authority of Singapore (MAS) will change the tax incentives it gives to single family offices in an effort to boost the hiring of locals and investment in the country’s equity markets.

Tax incentives will also be adjusted to encourage these firms to invest in climate-related projects and undertake more philanthropy through Singapore, MAS managing director Ravi Menon said at a briefing after the release of its annual report recently.

Family offices - the firms set up by the ultra rich to manage their affairs and investments - are currently able to get tax exemptions on a range of investments in Singapore. That’s helped fuel a surge in the number of single family offices based in the city-state from 400 at the end of 2020 to 1,100 in 2022.

Even though the increase of family offices has boosted the overall assets under management, much of that wealth isn’t seen to be invested within Singapore - blunting expectations that their enlarged presence would result in a flood of local jobs. The planned measures aim to fix this.

Single family offices seeking so-called 13O and 13U tax exemptions must meet minimum asset under management and business spending requirements. Some of the changes to the tax structure are:

-Encouraging participation in blended finance structures, including those supporting the region’s transition to net zero. For grants that these entities provide to support such structures with no expectations of income or return of principal, authorities will recognize as S$2 ($1.48) for every dollar spent, among incentives

-All investments in non-listed Singapore operating companies including private credit will be recognized

-Recognition of twice the amount invested in Singapore-listed equities, and eligible exchange traded funds, as well as unlisted funds that invest primarily in locally listed equities

The bulk of wealth flows into Singapore is from institutional investors, rather than family offices or wealthy people, according to Menon. The single family offices, that apply for and are granted tax incentives, managed about S$90 billion of assets as at 2021, less than 2% of the S$5.4 trillion total assets managed in Singapore, he said, as per the Bloomberg report.

Separately, the MAS said that it will take more action to boost surveillance and defence against money laundering risks in the sector. Among the measures, it will require all single family offices to notify the regulator when they start operations as well as maintain a business relationship with a MAS-regulated financial institution. A public consultation on these proposals will be released soon, Menon said.

Tags

Singapore Hindenburg Report Tax Laws HNWIs