Thu, Jan 23, 2014 - Page 1 News List

Data probe links Chinese elite to offshore tax havens

FAMILY SECRETS:The International Consortium of Investigative Journalists found links to many ‘princelings’ while analyzing documents leaked from two BVI firms

The Guardian, NEW YORK

Among those was Huang Guangyu (黃光裕), the founder of China’s largest electronics retailer and once the country’s richest man. Huang and his wife had a network of more than 30 companies in the BVI, according to the ICIJ records. Huang subsequently fell from grace and was in 2010 sentenced to 14 years in prison for insider trading and bribery.

Despite his imprisonment, Huang’s offshore network is not standing idle. In 2011, one of his BVI firms made an unsuccessful bid for the Ark Royal, the retired aircraft carrier that was once the flagship of the British Navy. According to press reports, Huang planned to turn the carrier into a shopping mall, but British officials decided instead to scrap the ship.

In total, the ICIJ database — which covers just two of the BVI’s numerous incorporation agencies — lists more than 21,000 addresses in China or Hong Kong as directors or shareholders of offshore companies, demonstrating the country’s status as one of the premier buyers of offshore services. In recent years, offshore jurisdictions have aggressively courted the Chinese market, with many opening offices and promotional sites in Hong Kong.

The BVI’s courtship of China’s rich and powerful may prove an embarrassment for the UK. The BVI remains a British overseas territory, and while largely independent in practice, UK authorities retain a degree of responsibility and connection with the islands.

British Prime Minister David Cameron has publicly pledged to take action against offshore secrecy and offshore tax avoidance, including in crown protectorates and overseas territoryent.

The role of Western financial institutions in establishing offshore structures has also attracted scrutiny, despite being a routine and entirely legal function for many of them.

The ICIJ records show both PwC and UBS had extensive contacts with incorporation agents in the BVI and other territories in the region. In total, UBS helped incorporate more than 325 offshore institutions for clients from China, Hong Kong or Taiwan, while PwC had a role in establishing at least 274.

PwC and UBS declined to comment on specifics regarding their activities in the BVI, or with China’s rich. However, spokesmen for both companies said their activities complied with appropriate law and ethical codes.

“As a matter of policy, PwC member firms do not comment about clients or their business,” a spokesman for PwC China said. “PwC’s tax advisory practice helps our clients make informed business decisions, balance their responsibilities to do the right thing for multiple stakeholders, often across many countries, and meet their tax requirements.”

A UBS spokesman said: “We operate to the highest standards in our business operations to meet all our legal and regulatory requirements.”

Additional reporting by staff writer

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