VANUATU MINISTER DEFENDS TAX HAVEN INDUSTRY

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Angered by Australian money laundering sting

By Anthony Klan

PORT VILA, Vanuatu (Port Villa Presse, May 15, 2008) - The Australian Federal Police’s AU$100 million [US$94 million] money laundering sting in Vanuatu has caused a political rift in the Pacific nation, with its finance minister chastising the corporate regulator over its plan to abolish the country’s tax haven status.

Vanuatu Finance Minister Willie Jimmy yesterday supported the country as a tax haven. He said the AFP’s raids on major accounting firms in the island nation late last month could be illegal and were a deliberate move by the Australian Government to abolish Vanuatu’s tax-haven industry.

Mr. Jimmy’s comments came as the alleged mastermind behind the tax scheme, 58-year-old Vanuatu-based Australian accountant Robert Agius, was yesterday released on bail of AU$4.4 million [US$4 million] by a Sydney court.

In a prepared statement, Jimmy said the AFP raids would be a "huge blow" to Vanuatu’s tax-haven industry, a major contributor to the tiny Pacific nation’s economy.

His comments are in contrast to those of the Vanuatu Financial Services Commission, which on Monday said the Government sought to overhaul the country’s secretive tax provisions by the end of the year and eliminate Vanuatu as a tax haven.

"We’ve been associated with this stigma for a long time and we now aim to get away from being a tax haven," VFSC commissioner George Andrews told The Australian.

According to the Australian Taxation Office, about AU$5 billion flows from Australia to international tax havens each year. About AU$350 million of that goes to Vanuatu.

Mr Andrews said the VFSC had "no idea" how much money entered Vanuatu each year because of the existence of secrecy provisions that prevented authorities from viewing 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.

"(This) is why we are changing these laws so we know exactly who and what we are dealing with," he said.

"These are big laws for us and once we have them in place, there will be a lot more transparency."

The VFSC, established by an act of the Vanuatu parliament in1993, is responsible for regulating and supervising Vanuatu’s non-banking financial services industry.

The Vanuatu State Law Office issued warrants that led to a series of raids on accounting firms in Vanuatu’s Port Vila late last month, including Mr. Agius’s PKF Vanuatu.

In his statement, Mr. Jimmy said he was concerned with the motives of the State Law Office to authorize the AFP raids, which he said would damage Vanuatu’s "sovereignty, integrity and reputation."

The Australian Government is a major aid donor to Vanuatu, fuelling criticism among Port Vila financial circles that the Vanuatu Government has been unduly accommodating to the AFP for fear of any financial recriminations.

Australia has AU$90 million in aid earmarked for Vanuatu over the next three years.

Jimmy could not be contacted yesterday and a spokesman said the minister was in Spain on government business.

Andrews did not return calls yesterday. The office of Vanuatu Prime Minister Ham Lini has not returned calls from The Australian for several days.

At yesterday’s hearing, Agius, who has been charged with conspiring to defraud the Commonwealth, was prevented from leaving NSW.

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