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Asian logging companies 'use British islands for tax dodging'
The Observer - May 10, 2014
An unpublished two-year investigation by anti-corruption experts, and seen by the Observer, says Britain should launch a major investigation into the use of the BVI and other tax havens by "high-risk" sectors such as Indonesian forestry. This follows a court case in Jakarta in which one of the world's largest palm oil companies, owned by billionaire Sukanto Tanoto, was fined US$205m after being shown to have evaded taxes by using shell companies in the BVI and elsewhere. The company has agreed to pay the fines.
Documents arising from the case show that Tanoto's company, Asian Agri, systematically produced fake invoices and fake hedging contracts to evade more than $100m of taxes.
According to evidence contained in more than 8,000 papers, the company, which employs 25,000 people in 14 subsidiaries and owns 165,000 hectares of plantations, was engaged in "routine and systematic fraudulent accounting and book-keeping practices" using British jurisdictions.
It is easy to set up shell companies in the BVI, and this makes them a favourite destination for Asian corporations and individuals. A cache of leaked documents obtained by the International Consortium of Investigative Journalists showed last year that nine of Indonesia's 11 richest families had used tropical tax havens.
Although there are legitimate uses for offshore companies, critics say tax havens fuel corruption and allow corporations and individuals to dodge taxes. "Powerful forest and palm oil conglomerates have set up shell companies in the BVI, Cayman Islands and Bermuda, but lack of transparency – including public access to the names of the actual owners of shell companies – makes it difficult for governments to monitor the legality of their activities," said Stephanie Fried of Ulu Foundation, a US organisation that tracks international financial flows. "Clearly, a full international investigation is needed not only by Indonesian authorities, but also by those in the BVI, the UK and other jurisdictions."
A government spokesperson said: "The government put tax and transparency at the heart of the UK's G8 presidency. As a result, the UK's overseas territories are consulting on establishing a central registry of beneficial ownership and on whether it should be publicly accessible. We believe a registry of this kind would provide the best outcome for sound corporate behaviour and for helping authorities, including those in developing countries,prevent misuse of companies for illicit purposes."