Despite helping draft the Asia Funds Region Passport (AFRP) framework and signing a statement of intent in 2013, Singapore opted out of the scheme earlier this month. The initiative is designed to allow funds to be sold more easily across different jurisdictions.
An MAS spokesperson told International Adviser the scheme had failed to address unequal tax rules, which would mean foreign funds offered to investors in one jurisdiction were not subject to similar tax treatments as funds managed locally.
Level playing field
“When we signed the statement of intent in 2013, the signatories [were] explicitly committed to reduc[ing] the potential impact of taxation arrangements which would otherwise impede the success of the ARFP,” the spokeswoman said.
She said this was consistent with industry feedback, which emphasised that a level playing field was needed for the ARFP to be successful.
However, the statement of understanding, recently signed by six countries, failed to address this issue and, according to the MAS spokeswoman, “does not provide any commitment to addressing the impediment of unequal tax treatment”.
“Singapore is therefore unable to sign the SoU at this point in time,” she said. “Doing so when there continues to be unequal tax treatment would not benefit fund managers in Singapore.”
Yet the MAS said it still remains open to participating in the ARFP when there is commitment to resolving the tax impediment. It also said it will continue to develop and finalise the arrangements for ARFP, including drafting the regulatory framework.
Japan, Australia, New Zealand, Thailand, South Korea and the Philippines have all signed the ARFP statement of understanding.
Singapore’s refusal to sign the SoU has caught many by surprise and is thought to disappoint asset managers hoping to tap into the abundance of wealth in the region.
The AFRP is expected to launch next year.