From the UN Monitoring group Report: Diaspora taxes and remittances 2011

From the UN Monitoring group Report: Diaspora taxes and remittances

Posted at FB July 2011

D. Diaspora taxes and remittances

381. Probably the most significant source of revenue for PFDJ is the excise of a 2 per cent income tax on Eritrean nationals living abroad.318 An estimated 1.2 million Eritreans — or 25 per cent of the total population — live in the diaspora,319 with the most important concentrations in North America, Europe and the Middle East. According to estimates by various national law enforcement officers, Eritrean eyewitnesses and former Eritrean Government agents in the diaspora, the Government of Eritrea is estimated to raise tens — and possibly hundreds — of millions of dollars on an annual basis.

382. Justifications for the tax vary. A senior Eritrean official described it to the

Monitoring Group as a land tax for expatriate Eritreans or dual nationals who own

land or property in their homeland.320 Numerous Eritrean expatriates in different

countries have described it to the Monitoring Group as a “consular service”. For

example, any Eritrean citizen seeking to renew a passport or Eritrean holders of

foreign passports requesting a visa to visit Eritrea must produce documentation of

their tax payments in their host country.321 On this basis, the 2 per cent tax is

calculated and the individual is obliged to make payment, in the form of cheque or

money order, into an account controlled by the local Eritrean embassy. Individuals

who have not required “consular services” for several years are nevertheless

required to pay “arrears” for years in which the tax was not paid.

383. Those unwilling to pay these taxes may have entry rights into Eritrea denied,

property in Eritrea seized or family members in Eritrea harassed. In cases where

host country documentation is considered to be unreliable, unofficial Eritrean

embassy or party officials may monitor the activities of the Eritrean diaspora

communities in order to assess their income and degree of compliance.

384. Monitoring Group interviews with former PFDJ and Government of Eritrea

finance officials indicate that these hard currency deposits are managed by PFDJ,

under the direction of Hagos Gebrehiwot, and not through State institutions such as

the Bank of Eritrea, the Commercial Bank of Eritrea, the Ministry of Finance or the

Treasury. Taxes collected this way are remitted to the accounts of different Eritrean

embassies abroad and thereafter transferred from embassy account to embassy

__________________

account, depending on operational needs, or transferred to privately held offshore

accounts.

385. The PFDJ Economic Affairs Department also controls millions of dollars in

hard currency in the form of remittances deposited by members of the Eritrean

diaspora sending money home to family and friends in Eritrea. Remittance deposits

are made through Himbol, a PFDJ-controlled wire transfer company that maintains

offices — both official and unofficial — at Eritrean embassies and community

centres abroad, and which uses international wire agencies as agents to affect

transfers.

386. Hard currency remittances accumulate in Himbol and embassy bank accounts

outside Eritrea, while recipients in Eritrea receive disbursements in local nakfa

currency. Since Himbol is a PFDJ-owned company, the hard currency deposits

abroad can be managed by the Economic Affairs Department of PFDJ as it sees fit.

As with taxation receipts collected in embassy accounts, this money is either

transferred to PFDJ-controlled accounts held in correspondent banks, moved to

(official or unofficial) embassy accounts, or disbursed as cash for transfer in

diplomatic pouch by Eritrean “diplomatic” couriers.

387. Although Eritrea is not alone in imposing extraterritorial tax obligations on its

citizens, there are some unique aspects of the manner in which this policy is

implemented. First, the tax may be applied to foreign nationals of Eritrean origin,

regardless of whether they maintain dual nationality. The tax is routinely collected

by diplomats at Eritrean missions abroad, a practice that arguably violates the

Vienna Convention on Consular Relations. In locations where Eritrea lacks

diplomatic or consular representation, the tax is often collected informally by party

agents or community activists whose activities may, in some jurisdictions, be

considered a form of extortion.