Ghost Companies in the Madeira Off-Shore

Since 1987, the Madeira Off-shore Zone has been run by a private company on a 30 year concession. It is the major beneficiary of the profits for exploiting this concession, through levying the yearly fees and licenses.

The privileged tax regime applied in this Off-Shore, created in 1984 originaly for industries, was broadened to financial services and shipping registration. The Off-shore has served as a virtual address for ghost-companies involved in multi-million deals that artificially boost the GDP and which are not taxed by any country.

To give an example, the Russian multimillionaire Oleg Deripaska, the ninth richest man in the world in 2008, uses a company headquartered in the Off-Shore to divert the profits of the United Company Rusal – the biggest world producer of aluminum. An audit carried out by the Audit Office of the Russian Federation reveals that Wainfleet, a company headquartered in the Madeira Off-Shore functions a ghost-company and serves to dissimulate UC Rusal’s sales, taking advantage of the tax benefits of the Off-shore. In 2007 it had a turnover of 1,7 of the Portuguese GDP, despite having only a capital stock of 5000 Euros and employing only four workers. According to the Portuguese Business Association, in the year 2007, it was the country’s biggest exporter (over 3000 million Euros).

Last week, the Off-Shore again hit the headlines due tan an investigation on tax evasion carried out in Italy regarding the purchase of the pharmaceutical company Chiron by Novartis Pharma, through the company Appold which is based on the Madeira Off-shore. A sum of 1226 Million was omitted from the deal.

Last October, the Portuguese investigative police was asked to collaborate in another investigation by the Italian Financial Police, to detain three managers suspected of fiscal fraud (90 Million) and money laundering. The Italian Police believe that at least seven companies based on the Madeira Off-Shore played a fundamental role in emitting invoices for inexistent services which served as a front for financial operations of a group of companies owned by the Italian Giuseppe Spadaccini.

According to the Ministry of Finance, of the 2981 companied installed in the Madeira Off-Shore, 2435 have no declared employees.

Source: excerpts from Publico newspaper 21.03.2011