Mauritius rejects the Paradise Papers: Unfounded Allegations

27 Nov 2017
Mauritius rejects the Paradise Papers: Unfounded Allegations


Mauritius, the Island State situated in the Indian Ocean, has firmly rejected the so-called ‘Paradise Papers’ and other subsequent articles on the grounds of ‘serious and unfounded allegations’. The Island which claims to be an International Financial Centre of substance   has made it clear that it is not a ‘tax haven’ but on the contrary is a fully compliant country with international laws and regulations.

The unfounded allegations
The International Consortium of Investigative Journalists (ICIJ) has recently leaked information on offshore centres around the world which have been named ‘Paradise Papers’ and they have unjustly levelled allegations against the Republic of Mauritius qualifying it as a ‘tax haven’ which is rising ‘at the expense of Africa’. The Honourable Prime Minister of Mauritius has issued a strong statement earlier this month and has forcefully refuted the unfounded allegations stating that “Mauritius has been falsely described as a tax haven and a place which promotes an environment of secrecy.”

 
The International Financial Centre of Mauritius
Mauritius has since 1992 set up an International Financial Centre (IFC) and over the years it has strengthened its IFC with relevant legislations, regulations and best practices which have made of Mauritius a competitive, transparent and reliable jurisdiction of substance.  In its latest report on ‘Ease of Doing Business’ the World Bank has recognised the favourable investment climate and has upgraded Mauritius to a ranking of 25th (previously ranked  49th) among 190 countries globally.

In June 2015, Mauritius has adhered to the ‘Multilateral Convention on Mutual Administrative Assistance in Tax Matters’ and it actually has  in place an exchange of information mechanism with some 127 jurisdictions. Mauritius has already implemented automatic exchange of information with the United States under the ‘Foreign Accounts Tax Compliance’ (FATCA) and it will start the process of automatic exchange of information as from 2018 under the ‘Common Reporting Standard’ (CRS).

What is a tax haven?
Mauritius vehemently rejects the unfounded allegation that it is a ‘tax haven’.  It is important to understand the meaning of a ‘tax haven’ in order to appreciate the position and status of Mauritius.

There is no generally accepted definition of what renders a country or jurisdiction a ‘tax haven’. The dictionary meaning of a ‘tax haven’ is  ‘a country which has a low rate of tax so that people choose to live there or register a  company there in order to avoid paying higher tax in their own countries’. Besides, very often such jurisdiction are commonly associated with lack of transparency, secrecy, and even illicit transactions.

Mauritius is not such a jurisdiction and on the contrary it has created a business enabling environment which is transparent and respectful of international standards.  In 2007, the Organisation for Economic Co-operation and Development’ (OECD) has given Mauritius an overall rating of ‘Compliant’ which is a testimony of the country’s openness and its integration in the global economy.  

Mauritius is a reputed tax-treaty jurisdiction but it is also a member of the Inclusive Framework and hence its commitment to participate actively in the BEPS project to fight against treaty abuse and base erosion.  

The distinction between tax evasion and tax optimisation
Very often, people who decide to surf on the wave of sensationalism forget to make the difference between ‘Tax Evasion’ and ‘Tax Optimisation’ or Tax planning’.

‘Tax Evasion’ is a wilful activity or practice designed with the firm intention to ‘evade’ taxation. It occurs when one hides from the relevant tax authority the full picture of one’s assets or revenue.   It is prone to ‘financial delinquency’ and is an illegal, unethical and immoral activity which is tantamount to a ‘criminal activity’ punishable by law.

On the other hand, ‘Tax Optimisation’ is perfectly legal. It refers to the process where one chooses the most attractive tax jurisdiction to minimise tax payments.

The offshore industry has been crafted by the world elite as a means to pay taxes in jurisdictions where prevailing tax regimes are relatively lower. When we look at the configuration of offshores centres around the world we find that each continent or sub-continent has a near-by offshore location: America has the Bahamas, BVI, Panama, the UK has the Channel Islands of Jersey and Guernsey, Western Europe have Monaco, Switzerland and Luxembourg, China has the vibrant centre of  Hong Kong, the Middle East countries have Dubai,  East Asian Countries and Australia have Singapore, Eastern European countries have Malta etc.  

Situated at the cross-road between Asia and Africa, Mauritius has been a key player in the economic development of the Indian sub-continent.  Since 1992 onwards Mauritius has been the greatest  outbound investor into India.  Institutional investors have chosen the Mauritian route to invest in India in order to take advantage of the favourable tax treaty which exists between the two countries. This is effective tax planning and is very distinct from tax evasion.

There is nothing illegal in planning to pay less tax in a legal manner.

The Mauritian Agenda for Africa
Mauritius is a founding member of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG) and stands in the forefront in the fight against money laundering and other forms of financial crime. Today, businesses are using the Mauritian jurisdiction as base in order to channel  investment into the Africa Continent because Mauritian has created an enabling environment  which is a reliable, transparent and competitive at the same time,.  Mauritian has signed a number of Tax Treaties and ‘Investment Promotion and Protection Agreements (IPPAs) with a large number of African countries, it has removed visa restrictions for entry into Mauritius and Mauritian Universities and campuses are harbouring a lot of African students for higher education. The platform for the development of the African Continent is already on its way!

As a member of the African Union (AU), the SADCC and the COMESA, Mauritius continues to contribute the sustained economic development of the Continent and the prosperity of all Africans. The jurisdiction combines good governance, a modern legal and regulatory framework, ease of doing business, and it offers  pool of trained  human capital who operate at world standard.  

Article by L Clensy Appavoo, Senior Partner of HLB Appavoo & Associates, our member firm in Mauritius. Contact Clensy on This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

 

 

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