Liberia Debunks Africa’s Panama Label: Slams ‘Maligned’ Attack on LISCR

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Monrovia – The Government of Liberia says its attention has been drawn to an article titled “Africa’s Panama” which is an attempt by a foreign free-lance reporter that is partnered with an “anonymous Liberian Journalist” to initiate a smear campaign about Liberia and its Corporate Registry Program.

The publication, according to the government, in a statement issued over the weekend, is a poor attempt to publish an issue which is a non-story because the steps and processes required to being fully complaint are far advanced and concluding.

The report first published in The Africa Report and a local Liberian newspaper, The New Democrat, insinuated that Liberia risks being placed on a tax haven black list by the European Union to be released by mid-2016.

“Liberia is likely to be a strong contender for inclusion on this list. Since the late 1940s, the small West African country has been running a tax haven with laws more secretive than Panama’s”, the report noted.

According to the report, Liberia is listed as a tax haven by Bulgaria, Greece, Croatia, Latvia, Lithuania, Poland, Portugal, Slovenia and Spain. And while the EU collects information on how its member states view other jurisdictions, it does not engage in any collective action against tax havens.

The report noted that 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, however, there was no evidence of any wrongdoing on the part of Sharif’s family.

“While Panama is found near the top of international rankings of financial secrecy, Liberia is one of a handful of countries that ranks even higher. Under the Tax Justice Network’s Financial Secrecy Index, Liberia had a secrecy score of 83 out of a maximum of 100. Panama scores 72.”

Liberia is also one of the few countries in the world that has not made it past the first phase of the OECD’s Global Forum for Tax and Transparency peer review process. This OECD-led initiative examines the legal systems of each member country and assesses them against international tax and transparency standards.

But the government in its response explained that while the Panama Papers expose the use of several offshore jurisdictions, such as the BVI and Panama, for inviting tax evasion, money laundering and other illegal purposes, Liberia has not been named as one of those jurisdictions.

The government states: “Over the past years, the Government of Liberia has been evaluating this program and has taken measures to improve upon the transparency and management of the program to meet all of the OECD requirements (note: the OECD is an international group, whose leading members are the major economic countries of the world).  Liberia is in fact an OECD “white-listed” jurisdiction.

The final step required for concluding all of the requirements is the passage of a legislation which is currently before the National Legislature and expected to be passed by next week; this will enable the Country to continue meeting the requirements of the OECD with respect to corporate transparency requirements.”

The government statement added that the report is a disingenuous to attempt maligning the reputation of the Liberian Presidency and the image of the Country as a substantive complaint regarding the ROL simply on account of delays in the passage of a piece of legislation, a responsibility that is not a function of the Presidency.

“The Country remains committed to cooperating with the OECD, which has given Liberia reasonable extensions on this legislation during and after the Ebola crisis.

“The author of the article “Africa’s Panama” alleges that Liberia “will be worrying about the fall-out. On the contrary, the government provided several reasons why Liberia should not and will not be troubling itself about the revelations that will emerge from the Panama Papers:

There are several reasons for this:

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 United States Department of State’s most recent International Narcotics Control Strategy Report (INCSR) as a jurisdiction of prime concern for money laundering. Additionally, the Registry is fully cooperative with USA OFAC regulations, and its HQ is based near Washington DC is reflective of Liberia’s long-standing cooperation with the United States Government on related matters.

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 world-wide. Based on this, 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.

The Government signed nearly 20 “tax information exchange agreements” (TIEAs), exceeding a key transparency requirement of OECD and is seeking to further its cooperation.

Legislation is currently before the National Legislature and expected to be passed within the next week; this will enable the Country to continue meeting the requirements of the OECD with respect to corporate transparency requirements.

Liberian non-resident entities cannot do business within 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.

The Corporate Registry is modeled off Delaware laws. The Registry requires that ownership information be maintained, and further only accepts instructions for the formation of non-resident business entities from professional intermediaries (for example law firms and accounting firms) that are regulated in the countries in which they operate and thereby comply with their own local KYC requirements.

While nonresident entities are permitted to open bank accounts in Liberia, there are few, if any of them that do so. If however, they were to do so, then the banking regulations will require all ownership and control information according to the banking regulations, such as Money Laundering legislation, which the OCED approved in the first phase initial review.

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 USA.

The accusation that the Maritime Program is secretive is false. The President traditionally publically reports on the activities of the Registries in her annual state of the Union. Moreover, the LISCR Agency agreements have been passed after extensive and transparent hearings by the legislators and were always made public.

The Maritime Registry maintains highest standard of scrutiny and 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 DC, its activity maintains the strictest standards under United States law and with close engagement with the United States government (notably the founder of the Registry was a former United States Secretary of State and has ever since maintained the heritage of strong cooperation with the United States Government).

The Corporate Registry, which primarily supports registration of Liberian flagged vessels, plays an important role in the flagship maritime registry, an important and stable revenue generator for the Country throughout its history. Its flagship operation is among the very few elite maritime programs that has top-marks for quality/safety across every major port authority/Coast Guard world-wide (e.g. USA Coast Guard, Japan, France, etc.). It is regularly nominated for awards for its safety and innovation by major shipping publications and trade associations. ROL/LISCR have a major full-time role at UN agency for Maritime (IMO) in constructing/enforcing global regulations for maritime safety/security and labour protections for seafarers.

Added the statement: “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 United States, which 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, incidentally, 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 insinuating that secret companies are being used to hide ill-gotten gains from drugs, corruption and terrorism.

“This unsubstantiated and inaccurate reporting ignores that Liberia is not listed by United States in its International Narcotics Control Strategy Report (INCSR) as a jurisdiction of prime concern for money laundering and that Corporate Registry operates in full cooperation with the United States OFAC department which oversees economic enforcement against terrorists and international narcotics trafficker.”

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.”

The government explained in its response that the Revenue Code provides for corporate income tax rate of 25%.

“The non-resident entities, which do not do business in Liberia, are not subject to local taxes as per the policy of most countries, but that does not mean that these entities are exempt from their tax obligations in the countries in which they operate. In fact these countries would mostly likely be OECD members and themselves compliant with the global reporting standards.”

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

“The reason for this is very simple. 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 set back 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.”

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