Kulibayev’s Fingerprint in Amsterdam – Tax Avoidance or Tax Efficiency
The Dutch “Mailbox” Façade
Earlier this year, a majority in the Dutch Parliament expressed their dissatisfaction that the country was being used as a tax haven for individuals seeking to obscure their business interests. These parliamentarians urged the government to develop fiscal strategies to combat associated challenges, specifically the use of non-transparent mailbox companies, whose popularity increased by 17% between 2013 and 2015 (Volkskrant, 13.10.2015).
Shadow Governance research reveals that several mailbox companies registered in Amsterdam are listed as shareholders of assets in Kazakhstan; some of which are ultimately linked to individuals in the Presidential family. In this case, Dutch ownership vehicles are believed to have facilitated tax avoidance and/or concealed shareholdings as their primary objective.
In many cases, proxy ownership serves as a way to protect one’s business interests by placing it under a foreign jurisdiction. This is a strategy used mainly by individuals from countries where the political elite can fall out of favour very easily, and is thus a way of protecting long-term interests. Thus, it is also a way of mitigating the political risks and controversial financial activities that could threaten the interests of even the most influential and entrenched elites.
Alternatively, it is also an exercise in ‘corporate burying’ whereby opacity conceals the ultimate beneficiary of the entity in question. This was a common feature of Hosni Mubarak’s Egypt whereby Egyptian businessmen used Cyprus and Cayman Islands to hide the true extent of their economic interests.
In terms of corporate governance, proxy ownership brings potential integrity issues, most notably emanating from possible entanglement with political exposure. Therefore, this challenges our understanding of whose financial interests are being met – that of a particular political elite or foreign investors. Due to the fact that these companies are typically opaque in nature, it is often difficult to provide concrete evidence of proxy ownership and the ultimate beneficiary of assets.
In previous decades, Kazakhstan’s political elite, and the Presidential family in particular, have used proxies to acquire and maintain control over lucrative business assets. For example, the President’s son-in-law, Timur Kulibayev, is known to hold some of his interests in a diversity of Kazakh sectors through Dutch registered nominees. In this particular example, it is believed that the primary objective is for tax evasion, as opposed to the secondary benefit of creating opacity and safeguarding his assets in the case of political turbulence.
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