The Tropical Loophole: Tax Sheltering in Seychelles

Almost any adult you ask about taxes will reply with vehement distaste. It is yet another burden appended to their never-ending list of chores that bring absolute mental exhaustion. Any shortcuts or loopholes available are jumped upon to place their fatigue on someone else, even going so far as to use illegal means to avoid taxation. Though tax evasion comes in many forms, people will often turn to offshore tax sheltering to conceal their taxable income from detection. Shelters are located across the world, but Seychelles, a small island off the Eastern coast of Africa, is particularly vulnerable to exploitation.

Shell companies are congregated as far as Singapore and as close as Delaware, however, the majority are located in Africa (Kerin). For US citizens, companies are most often established in Africa to avoid tax implications or to find a judicial middle ground for companies (Sharman). Yet, too often, shell companies quickly turn bad when their motives become illegal.  

Taking up only 177 square miles, the Seychellois population accounts for less than that of Davenport, Iowa (Shaer). Despite their seemingly small presence, Seychelles seems to be constantly wrapped up in financial scandals. They were included in the notorious Panama Papers and were revealed to have played a part in schemes that plundered Kazakhstan’s BTA Bank, channeled bribes from the Reserve Bank of Australia to Nigerian officials, and operated illegal Internet pharmaceutical companies (“How to Rob”). When investigating the causes of their vulnerability, it became clear that there were certain characteristics that leave Seychelles to the wolves: the accessibility to offshore incorporation services and their lack of regulations in their government.

In particular, the government structure of Seychelles facilitates the exploitation of their law code. Seychelles boasts a lack of capital gains taxes, withholding taxes, corporate taxes, and a variety of other economic and legislative structures that attract taxpayers hungry to find a way out of paying their taxes (“Tax Havens”). They also maintain a “Zelig-like presence” due to their ability to hide illegal activity occurring within their borders (Shaer). Their relaxed regulations, coupled with the growing popularity of Seychelles as a tax shelter, has pushed this tropical island to the top of the list for offshore tax shelters.

In addition to the relaxed regulations, it is incredibly easy to establish a shell corporation on Seychelles. A simple Google search for “incorporating a shell company” instantly yields dozens of companies offering their services. Through an experiment on shell companies, experts claim setting up a shell company would take a measly ten minutes. The steps are relatively simple, consisting of Googling a service, choosing a name, and authenticating the new company (Sharman). Throughout the process, incorporators are given countless options to build the perfect facade for their fake company. These services pay no attention to who their client is nor their goals, and they will quickly encourage one to establish a shell, whether it be on Seychelles or in another African country (Stothard). Additionally, establishing a company in Seychelles can cost less than $1000 whereas a company elsewhere could cost upwards of $4000 (“Shells”). These offshore incorporation services largely push Seychelles as the address for these shells because of the benefits provided by the Seychellois government and the cheap cost of incorporating. The ease with which shell and shelf companies can be established adds to the vulnerability of Seychelles for tax evasion purposes.

However unfortunate it may be that Seychelles is being exploited as such, there is not much we can do to change this situation. While new legislation can be proposed and laws can be changed, tax evaders will just turn to the next best shelter to disguise their money. Tax evasion and other illegal activities are nearly impossible to prevent however hard you may try. In the end, the use of these shell companies serves as another look into the corrupt and selfish wants of mankind.  

Works Cited:

"How to Rob Africa." Africa | Al Jazeera. N.p., 08 Nov. 2012. Web. 09 Mar. 2018. <https://www.aljazeera.com/programmes/peopleandpower/2012/11/201211714649852604.html>.

Kerin, James. "A Look Behind Shell Corporations." Investopedia. Investopedia, 17 June 2012. Web. 12 Mar. 2018. <https://www.investopedia.com/financial-edge/0712/a-look-behind-shell-corporations.aspx>.

Shaer, Matthew, Michael Hudson, and Margot Williams. "Sun and Shadows: How an Island Paradise Became a Haven for Dirty Money." International Consortium of Investigative Journalists. ICIJ, 3 June 2014. Web. 10 Mar. 2018. <https://www.icij.org/investigations/offshore/sun-and-shadows-how-island-paradise-became-haven-dirty-money/>.

Sharman, Jason. "Setting up Your Own Tax Haven Shell Company Takes 10 Minutes." Triple J Hack. Australian Broadcasting Corporation, 11 Apr. 2016. Web. 12 Mar. 2018. <http://www.abc.net.au/triplej/programs/hack/setting-up-your-own-tax-haven-shell-company-takes-10-minutes/7297094>.

"Shells and Shelves." The Economist. The Economist Newspaper, 07 Apr. 2012. Web. 14 Mar. 2018. <https://www.economist.com/node/21552196>.

Stothard, Michael. “My Brief Career as an Indian Ocean Tax Pirate.” Financial Times, Financial Times, 8 Apr. 2016, <www.ft.com/content/a98e4488-fd6b-11e5-b5f5-070dca6d0a0d.>