Business Intelligence: $21 trillion JUST treasure tip
Business Intelligence: $21 trillion JUST treasure tip [A$32 trillion may have been siphoned off to the Cayman Islands]
By Davendra Sharma, Islands Business
Merge the worthiness of the world’s two mega-huge economies—the United States and Japan—and you won’t still collect A$20 trillion.
But the world’s wealthiest individuals are hiding more than that—a whopping $21 trillion—$32 trillion in assets in offshore tax havens like Vanuatu, a tax transparency report sourcing data from the International Monetary Fund and Bank of International Settlements disclosed in August.
Vanuatu—which has been at the forefront of a global hunt for nearly 500 million pounds in August by the disgraced Quinn family from Ireland—has been named in the English report, commissioned by campaign group, Tax Justice Network (TJN).
TJN report author James Henry argued that the headline figure of A$21 trillion was probably a conservative estimate, adding that up to A$32 trillion may have been siphoned off to popular world tax havens like Cayman Islands, Switzerland and Vanuatu.
It said individuals and entities who swindled money into foreign havens were being assisted by professional bankers and tax accountants.
“These assets are protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy.”
The report said it was the price the world had to pay for encouraging a free and open global business world.
Recent statistics indicate that the world’s top 10 private banks now manage in excess of A$6 trillion on behalf of clients held in such world tax haven centres as Vanuatu—far higher than A$2.3 trillion they catered for five years ago.
British tax analyst and government advisor John Whiting said the question that should be asked is what is being done with those hidden stashes.
“If it really is that size what is being done with it all?” he asked.
Last month, ISLANDS BUSINESS reported that overseas enforcement agencies like the Australian Tax Office and the Anglo Irish Bank suspect that money laundering is rife in Pacific—especially in Papua New Guinea and Vanuatu.
Investigators from the former Anglo Irish Bank—now the Irish Bank Resolution Corporation—were in Vanuatu searching for nearly 500 million pounds it claims is being stashed there by the fallen Quinn family empire.
The Irish bank hopes its investigations in Vanuatu would help uncover fortunes held by the Quinn family—which is being sued for debts of 2.8 billion pounds.
Sean Quinn, his son Sean Junior, and his nephew Peter were found guilty of contempt of court in trying to thwart the bank’s operations.
The Quinn group, which started in Derrylin, Northern Ireland in 1973, quickly spread through Europe with manufacturing outlets in the United Kingdom, Germany, Belgium, France, Spain and Slovakia. The empire came to a sudden halt on January 16 this year, when its founder was declared bankrupt.
As attempts were still being made in Port Vila to retrieve some of the Quinn fortunes, the Irish high court jailed Sean Junior for failing to comply with court orders enforcing the Quinn family to disclose details of where assets worth millions of euro were being held from the Quinn’s family international property group.
When Seán Junior was asked by his father if he would go to jail, “he said he’d go if that was in the best interests of the [Quinn] group”, Peter Quinn told reporters in August.
Another Vanuatu high-flyer and professional accountant, Robert Agius was convicted and sentenced on August 9 as Australian authorities found him guilty of conspiring to defraud the Australian government.
Agius, a Vanuatu resident since 1979, was arrested in April 2008 in Perth along with three other accountants—Carol Abibadra, Kevin Zarafa and Deborah Jandagi.
They were accused of working closely with the now-deceased accountant, Owen Trevor Daniel, helping companies transfer monies away from Australia into Vanuatu’s tax haven facilities.
Some of those who took up Agius’ offers to move money from Australia have already been charged with tax fraud and were in jail. Up to 65 fraudsters have been charged and 22 of whom have been convicted.
It is estimated that A$1.275 billion is under the microscope in tax liabilities by these convicts, accused of money swindling cases.
Agius’ defence lawyers argued that international accountants did not regard helping overseas clients invest in havens like Vanuatu as being illegal or dishonest.
“Tax schemes were a relatively common occurrence,” said Peter Hastings, QC representing the accountants, in Sydney last month. He said we live today in “a different era” where schemes to avoid paying tax “were not on any alert that there was something unlawful about this form of arrangement”.
The convictions in Australia of Vanuatu-linked tax evasion masterminds emanated from years of involvement of the Australian Federal Police (AFP) stationed in Port Vila, who have been suspended from Vanuatu on claims of over-stepping their authority.
The AFP through its Project Wickenby found that some expatriate Australians like Agius acquired Vanuatu residential status and then start operating out of Port Vila by trying to solicit monies from businesses and individuals seeking tax-evasions. Agius’ PKF Vanuatu is one of a dozen of accounting firms which specialise in offering their cash-rich overseas clients.
Vanuatu Prime Minister Sato Kilman’s private secretary Clarence Marae was arrested last May in Australia over allegations of being linked to a money-laundering scheme, which was costing Australia millions of dollars each year.
The Australian Tax Office estimates that A$5 billion depart Australia to global tax havens each year with nearly A$350 million landing in Vanuatu. But according to the 1993 Act of Parliament in Vanuatu, the country’s tax haven administrators are not allowed to check how much investments were held being held in the country by foreign entities.
Commissioner George Andrews of the Vanuatu Finance Services Commission told Australian media lately that he had “no idea” how much cash filtered to Vanuatu each year because of the inherent secrecy provisions that restrict authorities from citing the company cash flows.
“At the moment, our laws don’t allow us to look into company books, which means we cannot get information from industry,” Andrews said.
He added that moves are afoot by Vanuatu to make the country’s tax haven facilities more transparent.
“(This) is why we are changing these laws so we know exactly who and what we are dealing with,” he said.
Operation Wickenby taskforce commander Warren Gray points out that Agius has over the years received commissions from tax avoiders who were predominantly “from the high-end of town”.
“We are talking about professionals, quite well-known people, people at the top echelons of business right through to small business operators who want to hide money,” he said.
False invoicing and easy access to accounts were some of the lures given by Agius company for an establishment fee of US$8000 and an annual fee of US$1380. PKF Vanuatu would then provide an Australian company or director with false invoices from an overseas-registered company that had a bank account in New Zealand, the AFP claims.
The invoices charged “consultancy fees, management fees or insurance premiums” to the Australian companies, which could be treated as tax expenses in Australian tax reporting regimes. It is understood that once payment for the false invoices had been made, the money would be transferred through a series of bank accounts and end up in the account of another offshore company controlled by Agius—and often registered in Vanuatu, Britain, Ireland or the United States.
As the new government of Prime Minister Peter O’Neill takes charge in Port Moresby, the Asian Development Bank warned that the country had poor tax compliance and enforcement mechanisms.
The ADB country economist Aaron Batten says lax laws in PNG could pave the way for foreign companies wishing to take advantage of investments in the resource-rich country.
“PNG suffers from poor tax compliance and enforcement. The PNG tax office lacks the manpower and resources to effectively pursue individuals, firms and industries it suspects of not paying full tax obligations,” said Batten.
He outlined that foreign entities and individuals were reaping PNG of potential revenue because of the government’s inability to accurately trace and solicit dues from investors.
Batten mentioned that PNG’s lure of attracting foreign investors with low-tax regimes was depriving the economy of potential revenue and its residents of a better standard of living.
“Strengthening revenue compliance and reviewing resource sector taxation arrangements would help alleviate some fiscal pressures over the medium term. Improving the inclusiveness of economic growth over the next decade will require re-invigoration of the micro-economic reform agenda to strengthen competition, lower barriers to new business and stimulate growth in the non-mineral economy,” he said.
Batten’s word of caution comes only a month after another Asian consultant, Dr R Bhaskara, who alerted the PNG Institute of Banking and Business Management (IBBM) of risks of money laundering from undetected criminal activities.
Bhaskara of the Indian Institute of Banking and Finance said although PNG had an anti-money laundering centre and the Financial Intelligence Unit in place, cases of domestic corruption and money laundering was rife in the country. As reported by ISLANDS BUSINESS last month, Bhaskara warned that misappropriation of government funds was costing PNG immensely.
For more on this story go to:
See separate story: “Secret donor’s £400,000 offer to aid Sean Quinn family in legal battle”
