Dozens of Chilean companies are reportedly evading taxes by having their official address in Easter Island. They are abusing the “Easter Law,” that gives inhabitants of the islands tax benefits. According to the island’s mayor, Edmunds Paoa, the tax evasion is a public secret.
Thousands of tourists enjoy the lush landscapes, the white beaches, and the mysterious mo‘ai on Easter Island every year. A true paradise at the far eastern corner of the Polynesian triangle, for those looking for a unique holiday, full of adventures and beauty.
Not only tourists see the island, also known as Rapa Nui, as a paradise. According to a report from broadcaster T13, Chilean companies are also enjoying the island — registering there to evade taxes they should be paying on the Chilean mainland.
At least 40 companies that operate on the mainland are reported to be using the tax construction. Easter Island mayor Pedro Edmunds Paoa also affirmed in the report that lawyers even specialize in this tax constructions and encourage companies to form them.
The Easter Island Law
The Easter Island tax construction is possible thanks to the “Easter Law,” of 1966 when Eduardo Frei Montalva was Chile’s president. His administration recognized the inhabitants of the island as citizens who were eligible for certain benefits. The tax benefit is one of them.
According to the Chilean tax authority SII, “Easter Island has a special tax regime which exempts any property or income from tax as long as the taxpayer is a resident of the island.”
To be nominally eligible to register on the island, companies borrow addresses from locals by paying them some money or giving them a share in the company. A woman who appears in the T13 report rented out her home address to a company and received several times CLP$100,000 (US$138) in exchange, but “never saw them, never met them, but there is a company here.”
Alex Villalobos, head of SII’s tax compliance department, said the authority is monitoring the situation and the companies that claim to be active on Rapa Nui.
But not only companies are using the Easter Law-construction to avoid taxes. According to Rapa Nui residents, people pay them to get their car, license plate and traffic permit registered on the island. These permits cost only CLP$700 per vehicle on Rapa Nui, and the vehicles are used on the mainland.
More on Rapa Nui:
Editor-In-Chief Boris van der Spek is the founder of Chile Today. He worked in Colombia, Surinam and the Netherlands as reporter and works with international media during major events, like the social crisis, the elections and the Pope’s visit.