Becoming the Switzerland of the Pacific : Vanuatu Protects Against Taxes and Death Duties

PORT VILA, Vanuatu —  Hanging on the wall in the National Portrait Gallery in London is a valuable and historic painting whose real ownership is known only to a company in this sleepy town in the southwest Pacific.

A diamond tiara insured for $180,000 locked in a London bank vault also is nominally owned by the same, little-known trust company called the Melanesian International Trust Co.

It is a joint venture of Hongkong and Shanghai Banking Corp., Barclay’s Bank of London, Australia New Zealand Banking Group and Australian International Finance Corp.

The real owners of the painting and the tiara, and many other people with cash, family companies or shares they do not wish to divulge to tax authorities, have put their holdings into trusts in Vanuatu to protect them from taxes and death duties.

Melanesian International is one more than 1,000 companies formed to take advantage of Vanuatu’s tax- haven status, which is earning the island group 1,300 miles northeast of Sydney, Australia, a reputation as the Switzerland of the Pacific.

Vanuatu’s efforts to attract capital by granting people anonymity is bringing a steady business growth from Asia, local bankers say.

Recent deregulation has helped. It is no longer necessary to disclose who really owns any of the trusts or 1,100 offshore companies now registered in Port Vila.

Numbered bank accounts also are expected to be introduced soon. They will be similar to those operated by Swiss banks and are expected to be a further inducement to wealthy companies and individuals to put their money into Port Vila.

With six resident foreign banks, and the regional headquarters of the Asian Development Bank, Port Vila is moving steadily away from pre-independence days when Vanuatu was a colony of both France and Britain.

The 80 islands, which already had 110 languages, ended 74 years of colonial rule with both French and English as official languages as well as two systems of education, health, justice and law enforcement.

Since independence in 1980, the Vanuatu government has attempted to overcome its legacy of confusion. It has established a uniform system of administration and introduced a local mixed language, called Bislama, as the national language.

The government examined the financial center operations begun under British law in 1979 and found they are beneficial to the country, the prime minister, who is an Anglican priest, said in an interview.