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News > Latin America

Kuczynski Admits to Offshore Tax Evasion

  • Peru's President Pedro Pablo Kuczynski participates in an event to present a balance of Peru's exports during 2017 in Lima, Peru March 13, 2018

    Peru's President Pedro Pablo Kuczynski participates in an event to present a balance of Peru's exports during 2017 in Lima, Peru March 13, 2018 | Photo: Reuters

Published 20 March 2018

On Thursday, Kuczynskwill face congress’s second attempt at his impeachment for "moral incapacity."

In a congressional committee investigation, Peruvian President Pedro Pablo Kuczynski admitted to using a company based in the British Virgin Islands (BVI) to legally avoid paying U.S. taxes, according to Reuters.

RELATED: Peru: Human Rights Lawyers Plan to Revoke Fujimori Pardon

In the seven-hour committee session, the current president revealed he registered the 2006 sale of his Lima house to Dorado Asset Management Ltd. - a company once based in BVI and managed by his daughter - for $US695,000. The company was later transferred to Peru and put under Kuczynski’s control in 2016, the year he took office.

The president, who will face congress’s second attempt at his impeachment, on Thursday, for "moral incapacity," told committee members the maneuver helped him avoid paying U.S. taxes on his Peru property.

"Why would we pay Uncle Sam and Mr. Trump a bunch of money that’s here in Peru?" Kuczynski asked the congress members.

The president said "It’s very simple. In the United States there’s a big tax if you give up your citizenship, and the less property you have, the less you have to pay. I have to offload my property or I die poor," Kuczynski told the committee.

A Kuczynski lawyer, Gonzalo del Rio, who was present during the session, told Reuters the transaction was legal, praising the president for discussing his financial history amidst his upcoming congressional veto vote.

Though his move was legal tax-avoidance, the wealthy and powerful have faced increased scrutiny and criticism with the publication of the Panama Papers in 2016 which revealed a vast network of the global rich who avoid taxes by channeling their money through tax havens in countries with relatively lenient tax laws.

"I’m more convinced than ever that the impeachment motion must succeed," Congress member, Karina Beteta, said.

Beteta also stated that Kuczynski couldn’t provide written evidence that he was no long financial advisor of his consulting firm, Westfield Capital Ltd when the company made business deals with Odebrecht while Kuczynski was finance minister between 2001-2002, and 2004-2005. Del Rio claims the president verbally gave up his role within Westfield while holding high public office.

Kuczynski had vehemently denied having any business connections to Odebrecht, before admitting, in December, to business relations with the Brazilian construction company saying they were legal.

"The president’s professional and public career has always been carried out transparently, within the banking system and paying corresponding taxes," Kuczynski’s office said in a statement on Friday.

Kuczynski’s December impeachment hearing ended in his favor, but it was widely believed former President Alberto Fujimori’s son, Kenji, a current Congress member, convinced other legislators to vote against the impeachment.

These accusations are supported by just-released videos showing a meeting between Kuczynski lawyers; a top executive department official, Freddy Aragon; and Kenji Fujimori trying to convince a fellow lawmaker to vote against the president’s impeachment in exchange for public works contracts in the legislator’s district.

In one of the videos, Aragon tells legislator Moises Mamani that he can pocket 5 percent of these promised public projects if he votes in the president’s favor.

Fujimori later warns Mamani, "Those who’ve voted in favor of impeachment have all the doors closed to them."

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