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4 countries lead way in offshore tax evasion

| Friday, April 5, 2013, 12:04 a.m.

People with offshore shell companies and trusts in the British Virgin Islands and nine other jurisdictions frequently used to evade taxes lived most often in China, Hong Kong, Taiwan and Russia, according to findings from one of the biggest data analysis and cooperative journalism efforts in history.

Organized by the Washington-based International Consortium of Investigative Journalists, a group of 86 journalists from 46 countries analyzed a computer hard drive containing more than 2.5 million files of corporate and personal information and more than 2 million emails.

The data included details of more than 122,000 offshore companies or trusts, nearly 12,000 agents or intermediaries, and about 130,000 records on the people and agents who run, benefit from or hide behind offshore companies from 170 countries and territories. About 40 percent of the files were duplicates.

Missing from the report released Thursday, the ICIJ acknowledged, were the names of the true owners for the vast majority of the secret accounts — an ongoing problem facing the United States and many other cash-strapped nations trying to locate tax evaders.

Journalists had hoped that with computer software used to dissect the hard drive “the data as to who was behind a company was a click away. In fact, database entries for ‘beneficial owners' were often empty.”

The report also furthers the oft-reported but erroneous notion that offshore accounts are used by large companies shifting tax burdens and “the mega-rich ... to own mansions, yachts, art masterpieces and other assets, gaining tax advantages and anonymity not available to average people.”

As part of its “Shadow Economy” series last year, which recently won a national Scripps Howard award, the Tribune-Review showed that almost anyone can establish a shell company and offshore bank account in Belize for less than $1,000.

The Trib series found that more than half the world's money — between $21 trillion and $32 trillion — passes through financial secrecy havens, with the British Virgin Islands hosting 400,000 companies, or 13 companies for every legal resident of the British territory.

Offshore companies often use straw men — called “nominees” — to pose as shareholders and directors, a practice sanctioned by tax and secrecy havens, the Trib reported. Real ownership is contained in hidden private contracts, not as a stockholder.

The Trib reported that the use of nominees is one of the main attractions of secrecy havens because it provides just that — secrecy. The ICIJ reported that its participating journalists mostly found the nominees on accounts. But sometimes, on accessing a company record during their analysis, “an alert screen popped up over the registered date, giving the name and contact details for the person or persons who really owned the company or assets.”

Among the findings highlighted by the ICIJ group report:

• Government officials and their families and associates in Azerbaijan, Russia, Canada, Pakistan, the Philippines, Thailand, Mongolia and other countries have embraced the use of covert companies and bank accounts.

• Many of the world's topbanks have aggressively worked to provide their customers with secrecy-cloaked companies in the British Virgin Islands and other offshore hideaways.

“A well-paid industry of accountants, middlemen and other operatives has helped offshore patrons shroud their identities and business interests, providing shelter in many cases to money laundering or other misconduct,” the ICIJ report said.

Lou Kilzer is a staff writer for Trib Total Media. He can be reached at 412-380-5628 or lkilzer@tribweb.com

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