KUALA LUMPUR: Malaysia’s latest moves to improve compliance with the Organisation for Economic Cooperation (OECD) tax haven rules include making amendments to the Labuan Offshore Business Activity Tax Act 1990 to allow the sharing of information with trading partners.
The OECD with the agreement of the G20 countries had put Malaysia/Labuan, Costa Rica, Uruguay and the Philippines on a list of “non-cooperative jurisdictions, including tax havens” on April 2. Subsequently, Malaysia was removed from the list on April 7.
The amendments would be part of a new legislation to enhance the range of financial products and services at Labuan to be tabled at the next parliamentary session, Labuan Offshore Financial Services Authority (Lofsa) director-general Datuk Azizan Abdul Rahman told reporters at the briefing on its 2008 annual report yesterday.
Azizan pointed out that Section 28B of the Lofsa Act was already amended in 2008 to allow disclosure and exchange of information.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz, who is also chairman of Lofsa, said: “It was highly unfortunate and unfounded to be singled out in such a manner.
“Labuan as an offshore financial centre is one of the most well-regulated and we also have very stringent policies at the entry point.”
According to Azizan, among the stringent regulations compared with other offshore centres, Labuan requires a physical presence by any institution that wishes to operate there and no bearer bonds are allowed.
For the financial year ended Dec 31, 2008 the number of Labuan companies had grown to 6,868 from 6,297 in 2007. Further growth is expected this year from the enhancement of delivery service and a reduction in annual fees from RM2,600 to RM1,500.
The number of financial institutions in the territory has grown to more than 300.
Lofsa saw its surplus fall to RM1.4mil in 2008 from RM2.7mil in 2007 but operating income grew to RM26.9mil from RM22.6mil. Reserves stood at RM29mil from RM27.6mil in 2007. Revenue for Lofsa comes mainly from fee income.
Zeti said Labuan also had a focus on the Islamic finance industry and retakaful sector.
Retakaful gross contributions grew 48.2% to US$162.3mil in 2008, driven by four full-fledged retakaful operators and nine retakaful windows.