Question
How did Epstein avoid paying taxes in the U.S. Virgin Islands?
Answer
Jeffrey Epstein established entities and residency in the U.S. Virgin Islands, in part to take advantage of the territory’s Economic Development Commission (EDC) program — a tax incentive structure designed to attract businesses to the islands by offering substantial reductions in federal and local income taxes.
EDC beneficiaries in the Virgin Islands could reduce their federal tax obligations to roughly 3.5% of income and virtually eliminate USVI local taxes, compared to standard U.S. rates. To qualify, companies were required to operate legitimate businesses that provided economic benefit to the territory.
The U.S. Virgin Islands attorney general’s civil lawsuit alleged that Epstein had fraudulently obtained and maintained EDC benefits by misrepresenting the legitimacy of his business activities. The lawsuit argued that his primary business on the island — operating a sex trafficking network — was not the kind of economic activity the EDC program existed to support.
The USVI AG suit sought disgorgement of the tax benefits Epstein’s entities had received over the years they maintained EDC status, in addition to damages related to the trafficking harms the lawsuit attributed to his Virgin Islands operations.
The tax benefit structure had allowed Epstein to significantly reduce his U.S. tax obligations for years, while maintaining his primary base of criminal operations in a relatively isolated jurisdiction.
Sources
- USVI Attorney General civil complaint, 2022
- New York Times analysis of Epstein’s USVI tax structure
- U.S. Virgin Islands Economic Development Commission records