Rapaport Magazine


By Marc Goldstein
Diamantaires Named in Offshore Inquiry

The Antwerp diamond industry was convulsed with rumors in April after a Belgian newspaper published the first in a series of reports on individual holdings in offshore investment companies, commonly referred to as tax havens because they reportedly are used by the wealthy to hide assets and avoid taxes. Le Soir, Belgium’s French-language newspaper, published the first story on April 5, listing the names of five major Antwerp-based diamantaires, along with the names of the various offshore companies in which each of them reportedly has investments. Additional names are expected to be revealed in subsequent installments of the ongoing investigation and story.

Stay Tuned…More to Come
   The International Consortium of Investigative Journalists (ICIJ)), which coordinated the 15-month-long investigative project, reportedly had access to 2.5 million leaked digital files on the workings of 120,000 offshore companies and trusts and nearly 130,000 individuals in more than 170 countries. An estimated 86 journalists from 46 countries worked on the project that has been dubbed “Offshore Leaks.” It is being called “the largest cross-border journalism collaboration in history.”
   Already, the impact of one of the published Antwerp names, Santosh Kumar Agarwal (Kedia), has reached all the way to the Antwerp World Diamond Centre (AWDC) headquarters, where Kedia is a member of the board of directors. On the day of the newspaper report, AWDC quickly issued a statement: “In the interest of the integrity of the Antwerp World Diamond Centre as an organization and the industry as a whole, Mr. Kedia has taken the initiative to withdraw from the AWDC Board of Directors, awaiting the outcome of a potential investigation.”

Hasty Assumptions
   David Wasserman, a tax lawyer at GMW Law Office in Brussels, explained that “There’s nothing in the Belgian law that prevents anyone from holding shares of a company, be it established abroad or even in tax havens. As long as the company has not distributed dividends that would have been ‘omitted’ in the tax return, the bare fact of being a shareholder doesn’t imply any sign of fraud whatsoever. Furthermore, the assumption that if someone has invested capital in an offshore trust that this money isn’t clean is totally unfounded.”
   “What’s essential,” continued Wasserman, “is that those companies are actually managed from their offshore location and not from Belgium because if the company happened to be effectively managed from Belgium, it would become automatically liable to Belgian taxation. Consequently, any offshore holder better have the proof that he actually went to the tax paradise at least once a year to hold the shareholder general assembly meetings and to make the major managerial decisions.”
   Some of the trails of the offshore companies published in the initial story were revealed to be Antwerp addresses, raising the possibility that the companies are, in fact, managed from Belgium.

Diamantaires a Target
      The offshore investors identified by “Offshore Leaks” reportedly include a wide range of government officials, billionaires, arms dealers, doctors and dentists, corporate executives, criminals, dictators and money launderers. But in Belgium, the focus is presumed to be on the diamond industry. To accompany its story, Le Soir published a photo that takes up almost half a page of a diamantaire with a loupe and a big diamond in his hand. The paper also noted that “Several Antwerp-based diamantaires did call upon fiduciaries to develop their offshore companies.”
   Two other points were being discussed in Antwerp. First, setting up an offshore company isn’t in itself illegal, which is why the editor in chief of Le Soir added, “Even if done legally, fiscal fraud isn’t moral.” That comment relates to the purported purpose of creating offshore companies — to hide assets and avoid taxation on those assets. In that case, it is expected that Belgium, which always has been especially aggressive in pursuing hidden assets and in going after tax revenues to which it feels entitled, will pursue taxes due on assets sheltered in these offshore companies.

Article from the Rapaport Magazine - May 2013. To subscribe click here.

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