Tax Law - Vanuatu and the use of overseas tax havens

For many years now a number of Australian taxpayers have been using overseas tax havens to shield their wealth from the Australian Taxation Office. Although there is nothing new in this it has come to greater prominence with the advent of Project Wickenby. Project Wickenby is focused on activities of Philip Egglishaw and any number of non-complying taxpayers who have availed themselves of his services. More recently there have been a raft of names including a large number of people in public life who have relied upon overseas arrangements to avoid paying their full amount of tax. 

The proximity of Vanuatu to Australia together with the Cook Islands has made them a favourite destination for Australian taxpayers seeking to avoid paying their full rate of tax. It is particularly attractive because it has an english speaking common law system and its official languages are English and French which makes it very attractive to Europeans. Interestingly it offers a number of products through its onshore professional establishment including international business companies, exempt insurance companies and exempt offshore international bank licensing. One of its great attractions is it is a tax-free tax haven. 

Over recent years Vanuatu has become a place of great interest to the Australian Tax Office as it has become a more and more popular tax haven for Australians. As a result the Australian government has sought to obtain concessions allowing it to penetrate the veil of secrecy by negotiating a taxation information exchange agreement or a mutual legal assistance treaty with the government of the republic. Whilst Australia’s interest has been quickening so has that of New Zealand and its revenue authorities. Obviously Australia and New Zealand could not allow this to continue forever and so their enquiries have focused on both tax evasion and money laundering at home and abroad. Of course their focus has been promoters, professionals/intermediaries and participants.

Accountants, like lawyers and financial planners, are the gatekeepers to the taxation system yet despite this they are the ones who pose the greatest threat to it. There are any number of tax evasion schemes which are currently being offered to taxpayers mainly through accountants. Essentially these schemes involve moving money out of Australia disguised as consultancy fees to individuals in Vanuatu with the money, in some cases, being moved to accounts in New Zealand and then loaned back to scheme participants to claim tax deductions less commission or fees paid.

In some cases they became a little more exotic throwing in a mix of R&D expenditure and some type of offshore insurance arrangement with names similar to either those at Lloyds or well recognised legitimate foreign insurers. Essentially these schemes are crude in nature and would escape attention provided nobody dug too deeply. Today everything has changed and the cloak of legitimacy provided by a range of legal documents has now been unmasked and taxation authorities including the ATO are now aware what they are looking for. 

What is known from newspaper reports and other sources is that Vanuatu has been targeted by the Australian and New Zealand Governments with particular involvement by the Autralian Taxation Office (ATO), Australian Federal Police (AFP), and Commonwealth Department of Public Prosecutions (CDPP). The activities of these government agencies has led to a number of arrests with court appearances scheduled for both May and June. Where promoters and professionals are involved their client lists are of great interest to the authorities. Obviously they are interested in any high profile individuals who have been involved in money laundering and/or tax evasion and will try and make examples of them provided any charges laid can be proven in court.