Panama Papers: Liberia Defends Its Record As A Tax Haven

Panama Papers: Liberia Defends Its Record As A Tax Haven

Liberia does not conform to the definition of a tax haven and is not considered one by France and the U.S., the Liberian government said in response to a report last week that the West African country is about to be blacklisted on an E.U. tax haven blacklist, FrontPageAfrica reported.

The current European Union website shows Liberia listed as a tax haven by at least nine countries including Bulgaria, Greece, Croatia, Latvia, Lithuania, Poland, Portugal, Slovenia and Spain, according to TheAfricaReport. While the E.U. collects information on how its member states view other jurisdictions, it does not engage in any collective action against tax havens.

But in response to the Panama Papers data leak, the world’s largest trading bloc is threatening sanctions against countries that appear on its list when the 2016 version is published, says TheAfricaReport.

The Panama Papers are a set of 11.5 million leaked documents detailing attorney–client information for more than 214,000 offshore companies associated with Panama law firm Mossack Fonseca, TheGuardian reported. The leaked documents contain the identities of the company shareholders, directors and financial transactions. They illustrate how wealthy individuals including public officials can keep personal financial information private. At the time of publication, the papers identified five then-heads of state as well as government officials, relatives and associates of government leaders of more than 40 other countries.

Liberian Information Minister Eugene Nagbe said the story “is an attempt by a freelancer who associates with a small London-based NGO for journalists to initiate a smear campaign about Liberia and its maritime program,” LiberianObserver reported.

The Liberia Maritime Flagship Program was started in 1948 as an entity registered in the U.S. with activities that involved the registration of ships and the registration of corporations that run the Shipping Registry, Nagbe said.

The publication said Liberia’s secret offshore companies made an appearance in the Panama Papers when a secret Liberian company connected to the family of Pakistan Prime Minister Nawaz Sharif was used to move funds.

“In that case, there was no evidence of any wrongdoing on the part of the Sharif’s family,” the publication said.

Liberia isn’t the only African country that showed up on the E.U.’s 2015 list of international tax heavens. So did better-known tax havens Mauritius and Seychelles. The list was published as part of the E.U.’s action plan to reform corporate taxation in the E.U., StrategicRisk reported.

Other countries and territories currently on the list include Andorra, Liechtenstein, Guernsey, Monaco, Brunei, Hong Kong, Maldives, Cook Islands, Nauru, Niue, Marshall Islands, Vanuatu, Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Grenada, Montserrat, Panama, St Vincent and the Grenadines, St Kitts and Nevis, Turks and Caicos, U.S. Virgin Islands.

Three out of four companies doing business with World Bank funds in sub-Saharan Africa in 2015 used tax havens, according to anti-poverty group Oxfam, USAToday reported. The Oxfam report was based in part on data released in the Panama Papers.

Liberia has been running a tax haven since the late 1940s with laws more secretive than Panama’s, according to TheAfricaReport. Secret companies have been used to hide money from drugs, corruption, and terrorism.

Describing Liberia as “Africa’s Panama” is “an attempt by a foreign freelance reporter … to initiate a smear campaign about Liberia and its Corporate Registry Program,” the Liberian government said, according to FrontPageAfrica.

TheAfricaReport story was was produced in collaboration with the Thomson Reuters Foundation, and written by George Turner “and an anonymous Liberian journalist whose identity is concealed to protect his publication from reprisals.”

The Liberian government provided several reasons why Liberia isn’t concerned about the revelations that will emerge from the Panama Papers, according to FrontPageAfrica:

Liberia is not a banking or financial center. There is no local banking system to be compared with the likes of those in the named jurisdictions and the Liberian banks have not been used for funding of illegal activities such as money laundering and terror financing.

Liberia is not listed on the U.S. Department of State’s most recent International Narcotics Control Strategy Report as a jurisdiction of prime concern for money laundering.

Liberia as a sovereign nation has entrenched in its revenue code a system of taxation based on source. This is its right and privilege and is common standard worldwide. All non-resident entities which are prohibited by statute from doing business in Liberia, have no sourced income, and are thus exempt from taxes in Liberia. Resident entities doing business in Liberia are subject to taxes.

Legislation is expected to be passed within the next week that will enable Liberia to continue meeting the requirements of the OECD with respect to corporate transparency requirements.

(Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade.)

Liberian non-resident entities cannot do business in Liberia and are required to operate and have their principal places of management and control anywhere outside of Liberia, which would require the non-resident corporations to succumb to the banking and compliance regulations in those countries where they are operating.

While nonresident entities are permitted to open bank accounts in Liberia, there are few, if any of them that do so.

Liberia does not conform to the definition of tax haven and in fact is not considered such by leading OECD countries such as France and the U.S.

The accusation that the Maritime Program is secretive is false. The Maritime Registry maintains highest standard of scrutiny and (is) universally praised by international bodies for its management and cooperation. It is also annually financially audited by well-regarded global accounting firm with operations headquartered in Washington, D.C. Its activity maintains the strictest standards under U.S. law and with close engagement with the U.S. government.

The “Africa’s Panama” major criticism of Liberia is that it creates an environment of secrecy behind which people with money can hide in order to evade paying taxes where they should be paying taxes. If this statement is to be given credence, then let’s look at the U.S., which (is) often labeled as world’s biggest tax haven and hosts vast sums of foreign money under conditions of secrecy the likes of which Liberia has never known.

“Britain, the second largest proponent of the transparency standard for automatic exchange, is responsible for hosting the largest network of tax havens, such as British Virgin Islands, The Cayman Islands, Bermuda, Jersey, and others.”

The government also took aim at the report for saying secret companies are being used to hide ill-gotten gains from drugs, corruption and terrorism.

The government said there seems to be no legitimate rationale for including Liberia in this non-compliant group of countries because Liberia is not a banking and financial center.

“It cannot compete with the likes of Cayman, Panama and BVI as none of the well-known large international banking institutions have branches here. The local Liberian banking system is not a funnel for funds derived from illegal activities such as money laundering and terror financing and has never been targeted as such by the international community.”

A final criticism is that Liberia has not passed through the OECD first phase review. But the government in its response explained that there is no stigma attached to this designation as many other countries have been in the same position.

“Liberia has not been able to compete with the larger countries, such as in Europe, as it does not have the infrastructure and manpower in place to assist with the implementation of the rigorous standards required by the OECD.

The further setback suffered during the Ebola crisis, from which Liberia is still recovering, required that the country meet more pressing priorities than acceding to the requests of the OECD and its members.

Despite all these setbacks, Liberia has taken major steps and to comply with the OECD, including legislation currently before the National Legislature. While Liberia is now passing further anti-secrecy laws, many major countries remind behind Liberia in satisfying the OECD. Per additional feedback by OECD’s peer review, the government remains committed to ongoing enhancements.”