Every year, the world's economies lose billions of dollars to tax avoidance. Estimates of the sheer scale of the losses fluctuate wildly with the IMF reporting that around $600 billion is lost due to profit shifting every year. A new paper published by UNU-WIDER took a closer look at the issue at country level, finding that the United States loses the highest amount in absolute terms by far with an estimated $189 billion unaccounted for every year. That's 1.13 percent of GDP. China comes second with $66.8 billion while Japan also records substantial losses of about $47 billion.
Earlier this year, major international organisations -including the IMF, OECD, UN and World Bank Group- called on governments from around the world to strengthen and increase the effectiveness of their tax systems to generate the domestic resources needed to meet the Sustainable Development Goals (SDGs) and promote inclusive economic growth.
In view of the growing concerns surrounding tax evasion, Trusted Source, a wholly-owned subsidiary of Temasek Management Services, has signed an agreement with GCS Agile of Australia to make tax evasion more difficult by adapting the FACS software programme into its finance services offering. FACS stands for FATCA (Foreign Account Tax Compliance Act) And CRS (Common Reporting Standard) Service. It is designed to better manage the complex requirements for the Common Reporting Standard (CRS), for which reports in Singapore and Australia are due for the first time this year.
CRS is an inter-governmental agreement between the world's Tax Authorities designed to detect tax evasion. Millions of businesses in more than 100 jurisdictions globally that manage the financial accounts of foreign tax residents must report to their local Tax Authority which in turn shares this financial information with the relevant home Tax Authority.
After Singapore, the FACS technology roll-out is expected to continue in Hong Kong, New Zealand, and South Africa. Locally, Australia's financial services companies are required to file CRS reports with the Australian Taxation Office on July 31. Each territory has differing compliance deadlines – reporting to the Inland Revenue Authority of Singapore, for example, is due on May 31.
"We are proud to have this opportunity to partner with Trusted Source, who we believe are the best positioned organisation to deliver FATCA and CRS compliance in Singapore using our FACS platform," said Gerry Carcour, CEO of GCS Agile.
The terms "tax avoidance" and "tax evasion" are often used interchangeably, but they are very different concepts. Basically, tax avoidance is legal, while tax evasion is not. Tax avoidance is the legitimate minimising of taxes, using methods allowed under the tax code. Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes - for example by setting up employee retirement plans and other means - all legal and provided for under the relevant tax codes such as internal revenue codes, state tax codes etc...
Tax evasion, on the other hand, is the illegal practice of not paying taxes by not reporting income, reporting expenses not legally allowed, or by failing to pay taxes owed. In this situation, "ignorance of the law is no excuse". Tax evasion is most commonly thought of in relation to income taxes, but tax evasion can also be practiced by businesses on state sales taxes and on employment taxes, in fact on any taxes a business incurs.
One of the major attractions for foreign entrepreneurs, companies and professionals when they relocate their businesses, careers or lives to Singapore is taxation. Singapore offers one of the lowest tax rates in the world for corporations and individuals alike, and follows a territorial basis of taxation. In other words, companies and individuals are taxed mainly on Singapore sourced income. Singapore corporate tax rate is capped at 17%.