Sunday, April 07, 2013

What the company registry in Cyprus tax haven actually looks like

From the Treasure Islands blog:

Courtesy of the Norwegian Business Daily Dagens Næringsliv (, with thanks to David Officer for the tip, we have this remarkable photograph of the Cyprus company registry. A rough web translation of the caption reads:
"PAPER JUNGLE. The employees at the company inspection register of Cyprus, drowning in documents that should have been public."

The story explains exactly what I and a few others have pointed out: that Cyprus has been pretending that it is a 'clean' financial centre, while serving as an offshore tax haven for dirty, murky and clean money by the simple expedient of its willingness to disregard its own laws. This is possible because Cyprus is one of those quintessentially 'captured' states: what has happened here is a far purer, more distilled version of, say, the capture of the political process in Washington, D.C. by Wall Street (and by the way here's a really superb article about some of that.)
Because Cyprus is in the EU, it is supposed to have signed up to all kinds of cleanliness operations and is consequently on all sorts of 'white lists'. DN writes:
"In 2004 Cyprus became an EU member. Countless EU directives, which supposedly will ensure transparency and safe conditions, have since made Cyprus a “clean investment country” for even more companies. . . Although Cyprus is now obliged to follow EU standards for transparency, companies on the island still seems to enjoy an extensive secrecy."
The newspaper is tracing the activities of John Fredriksen, one of Norway's richest people, who has taken out $7.3 bn in dividends from his companies in eight years. They ought to be able to find out what they are looking for:
"The European Commission for the internal market confirmed to DN that the company register in Cyprus must share the information it collects. . . Press Attaché Carmel Dunne said that all registers of companies in the EU are obliged to publish "a set of documents." These include "accounting documents for each financial year." Documents showing control and management of companies should be available together with audited financial statements of all companies that are required to deliver them."
It sounds quite good: thus the white listing, and Cyprus' relatively low secrecy score on the Tax Justice Network's Financial Secrecy Index.
So what happens when the journalists want to get the information? The whole article is a fabulous, brilliantly conveyed description of what really goes on in the "clean" Cyprus company - though I'll only paste a few short excerpts.
"Zenios" - hospitality – is the name displayed on the facade of the building that houses the company register in Cyprus. There is, however, little goodwill from the public servant who decides to take the law into his own hands one day in June 2011.
- Are you the police?
- No.
- Are you a detective?
- No.
- But who are you?
- I'm a journalist.
- These documents are secret.
The story isn't as simple as that, of course. The boss said they should be able to get the information, but:
"For the second time in one year The Norwegian Business Daily orders the folders for over 30 companies, including all the key Fredriksen companies. The result is the same as in 2011. None of the 30 folders contains a single statement for the years after 2000.
. . .
In the middle of the room you can just make out one of the company register of employees - right under a poster with the message "Customers are not always right."
- We are working as quickly as we can. But there is very much to do, says the woman. She looks, abashed, at her keyboard and explains that she cannot say much about the accounts.
- We are about five years behind, I think, said the woman - still with her eyes fixed to the keyboard. That proves to be a mild understatement."
The boss, Spyros Kokkinos, admits that there is a ten-year backlog. He continues, in the process explaining very clearly what the world's tax havens are about:
"When a company comes to deliver its accounts it is followed by a form. But the Treasurer who receives the document does not care about what actually is the form. So when the time comes, two, three, five, or a hundred years later, when we go through this, we may see that something is missing.
- Do you think anyone will exploit this situation?
- How?
- The fact that Cyprus is a good place to be if you have something to hide?
- If you want to cheat, you will try anything. We want to be a financial center that will all work with. We want to ensure that people can establish companies and businesses. Therefore, we will cut the bureaucracy, he said."
And there you have it. Cut "red tape" to speed things along. But what is this 'red tape'? Well, amont other things: that rather pesky nuisance requirement, which called transparency. Or those ever so tiresome checks for criminal activity. And so on.
Tax havens, in the eyes of their defenders, are supposed to make the world more 'efficient.'
I challenge anyone to explain how this set-up is or was 'efficient.'
This enquiry was, of course, a special case. Here was a media institution seeking information from the registry, amidst the greatest political and media firestorm the Cyprus tax haven has ever seen. Everything is in the process of change. The boss promises to get the documents - and the following day he does hand some over. That would probably not have happened even a few months ago.
The story has an endnote, which is also telling:
"DN wrote on Saturday that John Fredriksen in 2010 shifted control of their stock values from Cyprus to Jersey. Then it got old parent company Greenwich Holdings a new parent company: GHL Greenwich. British Controlled Jersey is outside the EU and will not disclose the financial statements of companies on the island."
So that's OK then. He will continue to manage his companies in an 'efficient' way, via the British tax haven of Jersey.
But 'efficient' for whom?


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