RICH PICKINGS: Tinkler – from Whitehaven to tax haven?

The billionaire's official line is that he's moving to Singapore because 'he just feels it's more comfortable', but as governments in many countries continue to slug the rich, there are more practical reasons to relocate.

Coal baron Nathan Tinkler is not a man content to stay still for long.

Just two months after merging his former coal company Aston Resources and the larger Whitehaven Coal, Tinkler this week launched a surprise bid to take Whitehaven private.

Never mind that the ink is barely dry on the merger paper, which delivered Tinkler a 21.4 per cent stake in Whitehaven. Never mind that Tinkler will need as much as $4.5 billion to pull off the deal, and his personal worth is around $1 billion at the moment.

Tinkler is determined to make something happen, be that an actual takeover or perhaps the flushing out of a rival bid. And quickly.

But that wasn’t the only bit of news to come out of the Tinkler camp this week. Some nifty work by the Sydney Morning Herald revealed that Tinkler has taken up residence in Singapore.

According to his PR man, Tim Allerton of City Public Relations, the city state is "an essential part of Asia … and he’s got some financiers and investors in Singapore – he just feels it’s more comfortable, he enjoys the city and wants to base himself there.”

Tinkler isn’t the only young billionaire in the news right now doing the Singapore sprint. Facebook founder Eduardo Saverin caused a storm when it was revealed days before the company’s disastrous float that he too had shifted to Singapore, thereby renouncing his US citizenship.

Saverin’s spokesman said his move was driven by the fact Singapore is "an attractive place to live and a convenient travel hub for doing business in Asia.

"US citizens are severely restricted as to what they can invest in and where they can maintain accounts. Many foreign funds and banks won't accept Americans."

Comfort, convenience, proximity to Asia…they are all good reasons for moving, but as many commentators have argued, the key reason is a little more practical: Tax.

Consider the following facts about the Singaporean taxation system:

– Income tax: A progressive system starting at zero per cent and capped at 20 per cent for those earning income of about $250,000. Compare that to Australia’s top marginal tax rate of 45 per cent and you’ve got a pretty compelling starting point.

– Corporate tax: The corporate tax rate is capped at 17 per cent, compared with Australia’s rate of 30 per cent – which looks increasingly unlikely to fall any time soon.

– Capital gains tax: There is none. End of story.

– Estate/death/inheritance taxes: Nope.

– Angel investment tax incentives: Approved angel investors who invest at least $79,000 in an eligible company can get a generous tax deduction (capped at $250,000) providing they hold their investment for at least two year.

Not hard to see the attraction, is it? And it’s no surprise that Singapore has become an undisputed centre of global wealth. According to the Boston Consulting Group’s recent world wealth report, Singapore has the most millionaire households per capita, with 188,000 households – or 17 per cent of all resident households – holding disposable private wealth of over US$1 million, excluding property, businesses and luxury goods.

Of course, the moves of Saverin and Tinkler won’t mean they avoid tax owed on deals made in their home countries.

As Paul Barry of The Power Index points out, Tinkler is still likely to face a capital gains tax bill in Australia, and his status as a non-resident for Australian tax purposes will mean he cannot access any CGT discounts.

Saverin also faces a hefty capital gains tax bill triggered by his decision to renounce his US citizenship; according to Bloomberg, he’ll face a tax bill of around $365 million based the "exit tax” that departing citizen must pay on capital gains. However, this can be deferred until Saverin sells his shares, if he is willing to pay interest to the US government during the deferral period.

"I am obligated to and will pay hundreds of millions of dollars in taxes to the United States government," Saverin said in a statement made in response to allegations he was dodging.

"I have paid and will continue to pay any taxes due on everything I earned while a US citizen.”

However, Bloomberg says his decision to shift in September 2010 could result him in saving up to $67 million in capital gains – based on the difference between Facebook’s value last September and its eventual float price. He’ll also of course save plenty of tax going forward.

Saverin and Tinkler join the likes of hedge fund managers Richard Chandler (who moved in Singapore in 2008 from his native New Zealand) and Jim Rogers (who moved from the US in 2007).

Rogers has become a vocal advocate for the city.

"If you were smart in 1807 you moved to London, if you were smart in 1907 you moved to New York City, and if you are smart in 2007 you move to Asia,” he has said.

"Singapore 40 years ago was a swamp with a half a million people. Singapore now, 40 years later, is the country with the largest foreign currency reserve per capita of any country in the world. Singapore is going to be the financial centre of Southeast Asia, probably Asia, and likely one of the top financial centres of the world.”

Aside from tax, there are a few other benefits for billionaires of living in Singapore, including:

Secrecy

Singapore is often described as the Switzerland of Asia as a result of its strict laws around client confidentially in the banking and finance sectors. While the nation does have more than 30 tax treaties in place, the confidentiality offered is so great that many Swiss firms are actually setting up European branches.

The media

Singapore’s tightly-controlled media lets big business get about their business. Nathan Tinkler can look forward to no more stories about his house being burgled, his property losses or his dud investment in a supercar club.

Education

The Singaporean education system was a big drawcard for Rogers, who wanted his children to study at top-notch institutions and to learn Mandarin. It is estimated 20 per cent of Singapore’s annual budget is poured into education spending.

Sovereign risk

It's extremely low. Private equity giant BlackRock last month ranked Singapore second to Norway in its ranking of 48 countries according to their sovereign risk.

All these elements are a part of the Singaporean government’s push to turn the country into a haven for entrepreneurs and the wealthy. Expect to see more wealthy entrepreneurs make the move, particularly if debt-laden governments continue to turn their sights on the wealthy.

But just one word of warning for all those would-be wealthy emigrants – getting a rich set of wheels will cost you.

In a bid to cut traffic congestion and take cars off the road, Singapore’s vehicle permits can cost as much as $70,000.

Which goes to show – the government always hits the hip pocket in some way.

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