Brexit: Turning Singapore-on-Thames into Reality?
The idea that the true reason behind the UK’s desire to split from Europe is to enjoy the tax haven benefits that Singapore benefited from back when they split from Malaysia back in the sixties to become a sovereign state. At the time, nobody outside the financial industry understood the extent of the late Lee Kuan Yew’s economic growth strategy.
Now, 50 years later, it’s become obvious. Massive infrastructure growth took the island from one with no natural resources, to a popular tourist attraction through their impressive casino and beach resorts, booming restaurant and entertainment industry, and the subject we’re going to tackle today: their reputation as a legal tax haven for big corporations around the world.
Singapore-on-Thames explained
Freedom from Luxemburg and Brussels would bring financial power back to London’s Westminster, and free them from the regulatory taxation rules currently placed on how the country conducts business with other countries. Britain has long desired to increase their corporate and industrial holdings by offering tax incentives for corporations and high net worth individuals seeking to invest in the country.
It’s a fact that if all Great Britain’s overseas territories combined into a single entity, they’d rank as the top offshore tax haven on the planet. Brexit is a direct slight at Brussel’s 2015 proposal to clamp down on what they refer to as “Industrial-scale tax avoidance” by big corporations.
Britain realized massive offshore benefits from offshoring
Back when Brussels announced their plans to clamp down and tighten up regulations on offshoring, Britain had already realized massive corporate growth by lowering corporate taxes from 28 percent to a much more attractive 20 percent. This saw many large corporations such as global giant, Starbuck’s European operations move into the country to take advantage.
They maintained a small staff and legally filtered through their UK operations and profited massively. This didn’t sit well with the European Tax Commission, who desire to create a more beneficial “common” tax system throughout all members of the European Union, to avoid one country having a competitive advantage over another.
How Singapore fits in with Brexit
Were the UK to have complete sovereignty from the European Union and its stringent taxation and offshoring laws, there’s no telling the power they would hold over other members of the EU.
Singapore currently boasts a series of attractive corporate tax policies that make it hard to resist. If Singapore-on-Thames were to happen post-Brexit, Britain could conceivably follow suit, growing their power and wealth considerably compared to where it stands currently.
Those companies boasting profits over $2.7 million can enjoy low, low income tax rates of a mere 17 percent. When profits are stepped up past the $20 million range, the Productivity and Innovation Credit (PIC) can get even lower tax rates.
Singapore all but outs themselves as a potential money-laundering and tax evasion destination by offering even bigger incentives to foreign banks, offshore funds, and global trading companies (Ie., corporations with massive financial holdings.
The country is also perfect for startups, who pay zero percent tax on profits up to $74,000 USD. Those with profits $222,000 and lower still only pay a tax rate of 8.5 percent, meaning lower net worth individuals running more modest operations can incorporate in the country and enjoy tax rates much lower than those found in Russia, France, Germany, Greece, and many other EU jurisdictions.
EU crackdown and race to Brexit era for Britain
Britain currently sits atop the world stage as an offshoring and tax avoidance destination, along with the world leader, the United States and Hong Kong (this is based on total wealth being held).
Europe has rejected Britain and other (current) EU jurisdictions objections to their new corporate transparency laws and are moving ahead with those rules.
These rules will be a big game changer, as corporations would be forced to disclose their owners, CEOs, shareholders, and all financial data.
Shell companies would be much harder to form, as EU corporations operating in member countries would be heavily scrutinized by European Commission regarding all cross-border activities in many of the common offshore destinations.
This doesn’t bode well for the UK, as the hallmarks listed in the new directive that will trigger immediate investigations by investigators, making common tax avoidance schemes all but impossible to move money from one country to the next without getting caught eventually.
Corporations would be forced to pay taxes to their country of origin, making incorporating in the UK pointless, as doing so and setting up headquarters to fool tax-makers an added expense rather than a savings.
