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Business News of Sunday, 3 May 2009

Source: The Observer

Barclays and Ghana plan tax haven

Barclays bank is playing a lead role in the establishment of a tax haven in Ghana, in a move that could see huge mineral wealth in west Africa vanish into it from poverty-stricken countries' coffers, the Observer can reveal.

The controversial British lender has for the last four years worked closely with the Ghanian government to start an International Financial Services Centre offering low taxes and minimal financial disclosure.

Development charities fear that the establishment of a fully operating tax haven so close to oil- and mineral-rich countries such as Nigeria, Sierra Leone and Equatorial Guinea will encourage a rapid increase in tax and capital flight.

There is also concern that cocaine barons, increasingly using west Africa as a trafficking route into Europe, could launder drug money through Ghana.

The process of establishing a Ghanaian tax haven has been under way since 2005 and Barclays was instrumental from the start when it signed a memorandum of understanding with the country.

Ghanaian banking laws have been reformed to allow Barclays to operate as an offshore bank. So far it is the only bank offering offshore tax services. But others are set to join when later this year a law is expected to be passed in Ghana that will allow for the establishment of trusts and company registration.

Vince Cable, Liberal Democrat Treasury spokesman, said: "Barclays seems to be the market leader in tax avoidance schemes and Ghana is a new name to add to the list. Unfortunately this is a very cynical way of doing business and I trust this will be noted by the government if ever they need to ask for cash."

Wilson Prichard, a member of the governance team at the Sussex University-based Institute of Development Studies, whose report on Ghana's tax and development is due to be published later this month, said: "Oil-producing nations are plagued by corruption and drug trafficking and the creation of this international financial services centre will make this worse - not better."

Barclays stresses that the creation of a tax haven in Ghana will be a source of high quality jobs and will encourage tourism and economic activity. The company said: "We adhere to the highest and most stringent levels of international regulation, rules and industry guidance for the financial services sector."

Barclays has been at the centre of series of high profile tax avoidance controversies in recent weeks. This week, the bank will update the City on its trading performance.

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