A Press Trust organisation established through an act of Parliament is among those registered in the tax havens of British Virgin Islands, Jersey and Channel Island, according to the Panama Papers.
Press Trust Overseas Limited, a subsidiary of Press Trust Corporation, is among the 214 000 offshore companies that were registered by the discredited Panama based law firm Mossack Fonseca, documents seen by INK Centre for Investigative Journalism reveal.
Early this month, the International Consortium for Investigative Journalists (ICIJ) and its international partners began reporting stories on the leaked 11.5 million documents that show that Mossack Fonseca systematically assisted the rich and powerful to hide money and evade taxes.
The papers show that Press Trust has used the discredited law firm since 2008 to handle its offshore services. As a public organisation, its financial report and annual reports do not indicate that the company is registered in tax havens such as British Virgin Islands.
Press Trust has footprints in companies both listed and unlisted at the Malawi Stock Exchange ranging from banks, telecommunication, beverages and fuel service stations.
The main object of the Trust is to provide funding by way of grants, donations or contributions to any person or institution for charitable purposes which are in the interest and for the benefit of the people of Malawi including for the advancement of their education, health, social welfare and housing, it says on its website.
In the 2015 financial year, the Trust raked in almost US$3 million in revenue but doled out almost US$700,000 in charitable expenditure.
Evidence unearthed by INK Centre for Investigative Journalism and Centre for Investigative Journalism Malawi through ICIJ shows that the company was registered in the British Virgin Islands on May 26, 1999.
The organization then appointed Switzerland and France based businessperson, Roger Ronald Matthews, to be its first director.
For more than a year Matthews ran the affairs of Press Trust Overseas Limited before seven other Malawians were appointed in September 14, 2000.
While the organisation has never mentioned in its official documents that it was registered and domiciled in tax havens, this week the organisation maintained that it was above board and that it has nothing to hide.
“PTOL was never formed secretly;
neither is it a shell company. PTOL was registered in the British Virgin Islands in 1999 under the International Business Companies Act (CAP 291),” said Chief Executive Officer Patrick Mhango in an emailed response.
Mhango further said the Reserve Bank of Malawi approved the foreign subsidiary’s incorporation and basis of operation in 2000.
He could not explain why the organisation chose to invest in tax havens and not in other jurisdictions.
Mhango further said the firm has a clean slate and its accounts are audited by Deloitte Zimbabwe. He however could not provide documentary proof on this.
“Indeed, I have never heard of a company sharing its documents such as minutes with the public. Therefore, these will remain confidential to PTOL” he said.
Asked about the rationale behind investing in a tax haven, Mhango said that as far as they are concerned British Virgin Islands is a credible jurisdiction in which to do business.
He added, “By the way, Press Trust being a public trust does not pay taxes either here in Malawi or indeed anywhere else. Therefore, the objective of PTOL was never to take advantage of the ‘tax heavens’. It was a purely commercial business decision to expand the investments of Press Trust globally in the well-established global capital and money markets”.
Asked about the organisation’s association with Mossack Fonseca Mhango said he was not aware of it, adding that their legal counsels are Obelisk Secretaries Limited.
Press Trust Overseas Limited, which is 100 percent owned by Press Trust, is domiciled in Jersey, Channel Island and British Isles but conducts its activities in Mauritius as an investment holding company, according to a copy of the declaration form from Mossack and Fonseca signed by Roger Mathews, Company secretary on May 20 2015.
Alongside Bermuda and Luxembourg, Mauritius is a recognised tax haven where major Banks stash illicit cash, according to non-profits US Public Interest Research Group Citizens for Tax Justice and International Business Times.
The World Bank study of Illicit Financial Flows in Malawi and Namibia estimates that revenue lost to corruption and tax evasion accounts for between 5 percent and 10 percent of the GDP.
Illicit Financial Flows include practices used to reduce tax liability and diminish a country’s revenue, such as tax holidays or transfer pricing.
Malawi lost close to US$500 million due to illicit financial flows, about 17 per cent of its GDP, according to the June 2015 Global Financial Integrity report. The lost funds could have paid the civil service wage bill for one year.
Anti-money laundering expert and private practice lawyer, Jai Banda, said while there is no law that prohibits the formation and registration of offshore companies in tax havens, there is a need to investigate the real reason for doing that.
“They might want to use that company to facilitate importation and exportation of goods. Or they might want to use that to externalise forex,” he said.
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