Popular uses of BVI’s financial system

Tax law is complex and varies so much from country to country that it is difficult to talk about what’s legal and what’s not. Here are two examples of financial behaviour that have proven popular in the BVI:

Between 2006 and 2012, the BVI was the second biggest source of foreign investment in China, ahead of the United States, Japan and Singapore and behind Hong Kong, according to the Tax Justice Network.

Yet, the money isn’t foreign, the TJN claims; it’s Chinese money that has been “round tripped.”

“Local Chinese send their wealth offshore, dress up that wealth in offshore secrecy, then return it to China illegally disguised as foreign investment,” the group writes in its BVI country report.

This investment benefits from lower taxes but it’s also a way to launder bribes or proceeds from corruption.

Using the BVI has become so commonplace in China that “BVI” is used as a verb.

It means “to open a company” with

no underhandedness implied.

Canadians have also used the BVI to take advantage of a tax treaty that allows profits from international business to be brought back into Canada as dividends.

According to a report prepared by Unite Here, a private sector union, one Vancouver family set up three companies in the BVI to funnel profits from a Las Vegas casino to a private trust in Liechtenstein. That trust paid family members dividends, which were brought to Canada at a low tax rate.

“The richest families in Canada, they’re the very ones who have lots of trusts and numbered corporations that take advantage of tax law. But these corporations are nothing more than people with lots of money. As soon as you have a corporation, you can do a hell of a lot to reduce the incidence of tax,” said NDP deputy revenue critic Murray Rankin.

“Let’s say that’s 100 per cent within the law, does that make it right?”