VANUATU: DOUBLE TAX TREATIES

Vanuatu Double Tax Treaties

Not having any taxes other than customs duties, VAT and stamp duty, Vanuatu has not entered into any Double Tax treaties with other countries.

The Mutual Assistance in Criminal Matters Act contains a procedure for co-operation with foreign investigators, and the Serious Offences (Confiscation of Proceeds) Act has anti-money-laundering provisions which could encompass fiscal crime.

In August, 2008, an attempt to stop evidence gathered in a tax evasion investigation being sent back to the authorities in Australia was thwarted by the Court of Appeal in Vanuatu.

The evidence was gathered by officers of the Australian Federal Police during raids on financial institutions, as part of a wider crackdown by Australia against offshore tax evasion under the banner of Project Wickenby. The Australian authorities were focusing in particular on the activities of one tax scheme promoter based in Perth, Western Australia, who was arrested in April.

The Australian Taxation Office (ATO) is also conducting 80 audits examining allegedly false tax deductions exceeding AUD90mn (USD84mn) in connection with the Vanuatu probe.

Earlier in the year, Australian and international agencies conducted operations across three countries to attack abusive tax evasion schemes linked to Vanuatu, and Australian Tax Commissioner Michael D’Ascenzo issued a warning that people who use offshore structures to generate false deductions "or to deliberately hide assets or income in tax havens like Vanuatu can face serious penalties including criminal prosecutions.”

The issue has caused divisions in the Vanuatu government. The Financial Services Authority has been keen to cooperate with the Australian and other international agencies in the investigation, and supports proposals to overhaul financial services legislation by the end of the year to make the jurisdiction less 'secretive.' Certain ministers such as Finance Minister Wille Jimmy, on the other hand, are aghast at the government's appeasement of the onshore authorities, and have warned that the changes will spell the end of Vanuatu as an offshore financial centre, which has come to play an increasingly important role in the Pacific nation's economy.

In a statement issued at the time of the Australian raids, Mr Jimmy said that this course of action would constitute a "huge blow" to Vanuatu's economy, and would effectively end its status as a 'tax haven.'

George Andrews, head of the Vanuatu FSC, has countered, however, that it is no longer desirable for Vanuatu to remained labeled as a "tax haven," telling the Australian newspaper that the jurisdiction has "been associated with this stigma for a long time."

Vanuatu Other International Agreements

Along with other offshore jurisdictions, and in response to OECD and FATF pressure, Vanuatu has taken measures to control money-laundering. In March, 2002, Australian Minister for Justice and Customs, Senator Chris Ellison, signed a Memorandum of Understanding with Vanuatu for cooperation in the exchange of financial intelligence. "The signing of this agreement is another important step in the establishment of an international network to facilitate the prevention and detection of money laundering and other financial crimes," said Senator Ellison. "Authorities in Australia and Vanuatu have worked together on a number of significant criminal investigations and cooperation between our respective law enforcement agencies has been excellent.

"Australia is very appreciative of Vanuatu's continued efforts to warn other Pacific Island nations about suspicious financial activity identified by the Vanuatu Financial Intelligence Unit," Senator Ellison said. Senator Ellison said there was increasing evidence to suggest money laundering activities were linked to people smuggling activities, the financing of terrorist activities and organised crime syndicates. "Greater intelligence on money laundering activities is a significant contributor to fighting transnational crimes, including people smuggling," he said.

Under the Memorandum, the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Vanuatu Financial Intelligence Unit agree to cooperate with each other in the exchange of information which may assist in the investigation and prosecution of persons suspected or having engaged in money laundering or other serious criminal activity.

Senator Ellison and the Hon Joe Natuman, Vanuatu's Minister of Internal Affairs signed the memorandum in Bali, Indonesia where they were attending the Regional Conference on People Smuggling, Trafficking in Persons and Related Transnational Crime.

Vanuatu entered into an agreement with the United Kingdom for the promotion and protection of their foreign investments in December 2003. Additional investment promotion and protection agreements are currently being developed with the USA, the Peoples Republic of China, Japan, France, Australia, New Zealand and New Caledonia.

In addition, Vanuatu is a beneficiary country under three important trade agreements: SPARTECA; ACP-EC/LOME IV Convention; and GSP.

Under these agreements, special treatment is afforded to imports from developing companies in the form of a reduction or total waiver of customs duties on a non-reciprocal basis.

The agreements are in operation with 23 donor countries, including: Australia, Austria, Bulgaria, Canada, Czechoslovakia, Finland, Hungary, Japan, New Zealand, Norway, Poland, Switzerland, United States of America, USSR, and the European Community (EC) which comprises Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain and the United Kingdom. The European Community (EC) applies the Lomé Scheme whilst Australia and New Zealand apply SPARTECA to the South Pacific Island Countries who are members of the South Pacific Forum.