🔒 Mauritius ‘golden passport’ scheme flagged on OECD blacklist

EDINBURGH — In an effort to clamp down on tax evasion, the Organisation for Economic Cooperation and Development has published a blacklist of countries that are selling citizenship. Mauritius and the Seychelles, popular with South Africans, are on the list. It’s not just tropical islands that are under scrutiny. The United Arab Emirates and Malaysia also have a showing on the league table of countries that have turned nationality into a marketable commodity, enabling the rich and the crooked to hide behind complex tax laws. The OECD is concerned about tax evasion. – Jackie Cameron

By Thulasizwe Sithole

Mauritius and the Seychelles are among countries flagged as operating high-risk schemes which sell either residency or citizenship in a new report released by the Organisation for Economic Cooperation and Development (OECD).

A blacklist of 21 countries whose so-called “golden passport” schemes threaten international efforts to combat tax evasion has been published by the west’s leading economic thinktank, reports The Guardian.

The Paris-based OECD as raised the alarm about the fast-expanding $3bn (£2.3bn) citizenship by investment industry, which has turned nationality into a marketable commodity, says the UK-headquartered news organisation.

___STEADY_PAYWALL___

“In exchange for donations to a sovereign trust fund, or investments in property or government bonds, foreign nationals can become citizens of countries in which they have never lived. Other schemes, such as that operated by the UK, offer residency in exchange for sizable investments.”

The programme operated by Malta is particularly popular because as a European member state its nationals, including those who buy citizenship, can live and work anywhere in the EU, notes The Guardian. The country has, since 2014, sold citizenship to more than 700 people, most of them from Russia, the former Soviet bloc, China and the Middle East, it says.

“But concern is growing among political leaders, law enforcement and intelligence agencies that the schemes are open to abuse by criminals and sanctions-busting business people.

“Transparency International and Global Witness, in a joint report published last week, described how the EU had gained nearly 100,000 new residents and 6,000 new citizens in the past decade through poorly managed arrangements that were ‘shrouded in secrecy’.”

Also on the OECD blacklist, says The Guardian, are a handful of Caribbean nations that pioneered the modern-day methods for the marketing of citizenship. These include Antigua and Barbuda, the Bahamas, Dominica, Grenada, St Lucia, and St Kitts and Nevis, which has sold 16,000 passports since relaunching its programme in 2006.

Premium: Passports for cash: Citizenship bargains galore in the Caribbean

“After analysing residence and citizenship schemes operated by 100 countries, the OECD says it is naming those jurisdictions that attract investors by offering low personal tax rates on income from foreign financial assets, while also not requiring an individual to spend a significant amount of time in the country.

“Second passports can be misused by those wishing to ‘hide assets held abroad’, according to the thinktank. Its flagship initiative is a framework for countries to cooperate in the fight against tax evasion by sharing information. Known as the Common Reporting Standard, the framework allows for details of bank accounts an individual might hold abroad to be sent to their home tax office.”

Read also: Expect a clamp down on passport schemes for investors – The Economist

The problem is this: The OECD believes the ease with which the wealthiest individuals can obtain another nationality is undermining information sharing. “If a UK national declares themselves as Cypriot, for example, information about their offshore bank accounts could be shared with Cyprus instead of Britain’s HM Revenue and Customs.”

“Schemes can potentially be abused to misrepresent an individual’s jurisdiction of tax residence,” the OECD has reportedly warned.

The final names on the list, according to The Guardian, are Bahrain, Colombia, Malaysia, Mauritius, Montserrat, Panama, Qatar, Seychelles, Turks and Caicos Islands, United Arab Emirates and Vanuatu.

“Together with the results of the analysis, the OECD is also publishing practical guidance that will enable financial institutions to identify and prevent cases of avoidance through the use of such schemes, by making sure that foreign income is reported to the actual jurisdiction of residence,” adds the newspaper.