Pacific countries struggle to shake tax haven reputation ^Featured

Millions of documents from a boutique Panamanian law firm Mossack Fonseca -- now known as the Panama Papers -- were given to several media organisations around the world and have revealed the firm's involvement in setting up shell companies in offshore jurisdictions, which has allowed the world's richest people to avoid paying taxes.

The documents have implicated a number of Pacific Island countries, including New Zealand, Samoa, Niue and Vanuatu.

They revealed that Samoa was an active tax haven, with hundreds of shell companies operating through the country's branch of Mossack Fonseca. The company set up in Samoa in 2004, reportedly after it was pushed out of Niue, and leaked emails showed that Mossack Fonseca had urged the Samoan government to stall Australia's request to sign a Tax Information Exchange Agreement, an agreement which Samoa did eventually sign.

They also showed that Samoa's High Commission in Australia was involved in setting up shell companies.

A political scientist and security analyst said the revelations came as no suprise as Pacific countries have long been regarded as tax havens, and there is ongoing concern that the region's countries are being used for money laundering and other unsavoury activities.

Paul Buchanan, a New Zealand-based security analyst, said there has long been a general concern that in the Pacific Islands, and New Zealand, there is a very loose regulatory regime.

"Not only in the financial sector, but in other sectors as well, for example the creation of shell companies as opposed to legitimate businesses is very much a concern throughout the South Western Pacific," he said.

Dr Buchanan said this was part of a more general problem with a lack of regulation on financial transactions and other forms of commerce.

Malakai Kolamatangi, the Pacific director at New Zealand's Massey University, said this type of activity had been going on for a long time in Samoa, Niue, Vanuatu, Cook Islands, Tonga and Nauru.

However, he said the region was required to clean up its act after the terrorist attacks on the United States on September 11, 2001, which raised questions over whether money laundered in the Pacific had links to terrorism.

He said the dilemma was that the Pacific had in the past shown itself to be vulnerable to some questionable schemes.

"That's the problem we've got in the Pacific, is the lack of the ability to generate income," Dr Koloamatangi said.

"So why I say that is, if there is remnants of these tax havens or tax avoidance and tax evasion schemes still in the Pacific, I wouldn't be surprised."

In a statement on Monday night, Samoa's government said ten licenced trustee companies, including Mossack Fonseca, currently operated under its international financial centre.

It said the practice was legal, and common, and that Samoa prided itself on leading efforts to ensure the conduct of businesses was regulated and supervised in compliance with international standards.

RNZ