(Originally published in the Vanuatu Daily Post‘s Weekender Section.)
Since the Australian Federal Police brought Project Wickenby to Vanuatu with the arrest of local resident Robert Agius and raids at PKF House and elsewhere, people here have been outraged over what they characterise as Australian arrogance. Australia, they charge, feels it’s bought the right to act as it pleases here. By making the government of Vanuatu dependant on their money and advisors, many argue, Australia has subverted Vanuatu sovereignty and now operates as it pleases here.
Mr. Agius stands accused of funneling about $100 million into Vanuatu as phony consulting fees. Prosecutors claim these fees – minus a commission for Mr. Agius – were then sent back to Australia as loans. The loans’ tax-free status allowed participants in the alleged scheme to avoid paying as much as $13 million in taxes.
News reports indicate that Mr. Agius is accused of having earned about $1.4 million from his involvement in this scheme.
The Agius affair is treated as a business story by Australian news sources. The contrast with how it’s reported in Vanuatu could not be starker. Mr. Agius’ guilt or innocence is secondary in the local narrative. This is, above all, a story about Vanuatu’s sovereignty, or lack thereof.
Since the raids, recriminations are rife. Notably, the Port Vila Council of Chiefs has accused Australia of acting like a spoilt child for having shown so little consideration and respect for its Pacific brethren. Strong words indeed for a group normally quite reserved in its commentary.
The government of Vanuatu doesn’t fare very well in this version of events. It’s been castigated as weak, unwilling to defend its interests or its citizens. It’s been accused of having an unhealthy addiction to foreign advisors. Australia’s assistance to the Attorney General’s office (paying, some say insinuatingly, the AG’s salary) is viewed with great cynicism.
It’s perfectly understandable that people might be unhappy with the way events have unfolded. Nobody likes being pushed around. But, no matter how shocking it may be, nobody should be the least surprised.
This story is about money. From top to bottom, money is at the root of every circumstance and every decision.
The one exclusive right that sets governments aside from all other entities is their right to levy taxes. Indeed, along with representation, taxation is one of the defining characteristics of national sovereignty. Only government has the right to demand that its citizens give it money in order to invest in the commonwealth. If taxation proves too onerous, citizens are offered the remedy of voting for change every few years.
When citizens don’t pay their taxes, it reflects poorly on the government’s mandated right to collect them. Revenue losses notwithstanding, the perception that some people pay less than their share undermines the very concept of a democratic commonwealth.
So here we have Australian authorities watching someone whom they consider one of theirs, living just a stone’s throw away, enticing other tax-payers to shirk their legal responsibilities by playing shell-games with their cash. The vast majority of their citizens have actively invested in the country through tax contributions, so authorities have all the resources they need to pursue the alleged transgressor, using whatever methods they deem fit.
On the other hand, the government of Vanuatu is vividly aware of its inability to provide even nominal levels of service to all of its citizens. It’s so strapped for resources, in fact, that it could not function without donor assistance. Its citizens can’t support any appreciable level of taxation. In order to bring money into the economy, Vanuatu shines up its tax-haven credentials, distinguishing itself from its more affluent and powerful neighbours by the promise that it won’t demand too much of the investors’ money.
Vanuatu’s domestic cupboard is bare, so it sells its social contract short in order to get any money at all from outside sources.
Of the $100 million that have reportedly crossed our borders, a few paltry vatu have been redirected to the betterment of the nation. The rest have either been returned or pocketed as profits. Compared with nothing at all, of course, those few vatu look pretty good. And let’s be clear: Vanuatu’s tax status is the only reason most expats invest here.
That suits investors just fine, as long as things go well. When things turn pear-shaped, though, the recriminations flow. But how can they reasonably expect the government to defend them when they invest so little in it? Besides, if Robert Agius really did keep his Australian passport, then he has effectively renounced his Vanuatu citizenship, according to chapter 3 of the constitution. The government can’t help him no matter how much it might want to.
Australia isn’t guiltless in this. With $300 million invested in Project Wickenby, it’s been nothing but a fiscal sinkhole so far. Under pressure to produce, authorities might well have overstepped. It wouldn’t be the first time.
If Vanuatu were stronger as a nation, none of this might have happened. Not to put too fine a point on it, investors here have got exactly the government they paid for.