The Vanuatu government cancelled the passport issued to Indian Premier League (IPL) founder Lalit Modi, saying that escaping extradition was not a legitimate reason for citizenship in the island nation. Lalit Modi, wanted in India for alleged financial irregularities, earlier applied to surrender his Indian passport at the Indian High Commission in London.
Vanuatu Prime Minister Jotham Napat directed the country's Citizenship Commission to revoke Lalit Modi's passport after "recent revelations in international media."
Where is Vanuatu?
Vanuatu is an island nation in the South Pacific Ocean, about 1,750 km east of northern Australia. It lies southeast of the Solomon Islands, northeast of New Caledonia, and west of Fiji.
The archipelago consists of approximately 83 islands stretching 650 km in a Y-shaped configuration. Port Vila, situated on Efate Island, serves as the capital and largest city.
Formerly administered jointly by Britain and France, Vanuatu gained independence in 1980. Its economy depends on tourism, agriculture (copra, beef, kava, cocoa), and offshore financial services.
Is Vanuatu a Tax Haven?
Yes, Vanuatu is considered a tax haven. The nation imposes no income tax, withholding tax, capital gains tax, inheritance tax, or exchange controls, making it attractive for offshore financial activities.
This status has drawn scrutiny from international regulators.
On Pentecost Island in Vanuatu, villagers perform a daring tradition called land diving - jumping headfirst from wooden towers with vines tied to their ankles. Just like this risky plunge, Vanuatu faces an uncertain future as the world cracks down on tax havens.
The country's offshore finance industry took off in the 1970s amid global deregulation. But as financial crime - including money laundering, drug trafficking, and arms smuggling - became rampant, Vanuatu came under increasing pressure.
The Financial Action Task Force (FATF) placed it on its "grey list" for weak anti-money laundering regulations, isolating its banking sector. The 2017 'Paradise Papers' leak exposed hidden wealth tied to its offshore industry.
Vanuatu on Being Labelled a Tax Haven
Vanuatu changed its laws to improve financial oversight and transparency, leading many offshore banks to shut down. Yet, some in Vanuatu feel the country is still unfairly seen as a tax haven. Marie Noelle Ferrieux-Patterson, who leads the corruption watchdog 'Transparency International', argues that some US states offer even more secrecy than Vanuatu.
After the Global Financial Crisis, 83 countries agreed to stricter tax rules under the Organisation for Economic Cooperation and Development (OECD). While six Pacific nations joined, Vanuatu remains on a list of countries yet to take full action. It will undergo an OECD review next year, abc.net.au reported.
Ms Ferrieux-Patterson insists Vanuatu is already quite transparent, as most of its international banks are linked to Australia and follow both Vanuatu and Australian regulations.
Vanuatu's History with Financial Controversies
Vanuatu's reputation as a tax haven is not new. In 2001, former Prime Minister Barak Sope was charged with forgery over unauthorised financial guarantees worth between $23 million and $100 million to Indian businessman Amarendra Nath Ghosh, as per CNN. The guarantees, signed without proper approval, led to Mr Sope's removal from office in April that year.
His successor, Edward Natapei, launched an investigation into the scandal, while Mr Sope, previously flagged by the Ombudsman Commission, continued to face legal trouble. At the time, Vanuatu's financial practices were under heightened scrutiny, leading to its withdrawal from WTO accession talks due to financial concerns.
