Since its inception in 1992 under the Mauritian Offshore Business Activities Act (MOBAA), the global business (formerly known as offshore business activities) has experienced sustained growth. During the same year, the Freeport was created in a view to liberalize the global financial sector. Over the years, the global business has grown significantly to become one of the main pillars of the economy. This sector currently contributes to 11.8% of the Mauritian economy. It is estimated that the sector, including banking, directly employs more than 15,000 professionals.
In 2000, Mauritius Foreign Direct Investments’ to India had totaled $134.5 billion. For the six months ended September 2019 – the second largest source of foreign direct investment into India was from Mauritius with $6.36 billion in investments. Mauritius currently has a network of 45 tax Treaties which are based on a combination of the Organisation for Economic Co-operation and Development (“OECD”) and the United Nations Model Treaties.
On 10 August 2016, the Government of India notified a protocol (the “India-Mauritius Protocol”) amending a 33-year-old tax treaty with Mauritius (the “India-Mauritius treaty”) that had exempted the island’s investors from capital gains tax on investments in India. The exemption encouraged foreign funds and companies to route investments into India through Mauritius, impeding India’s efforts to increase tax revenues. Mauritius kept on being the main vehicle for Foreign Direct Investment (FDI) into India.
The change in the treaty between Mauritius – India had a negative impact on our Global business Sector whereby in the year 2015, the total of Newly Licensed Companies was 2,676 but in 2019 a 26% fall was felt leading to decrease in new incorporation.
It is believed that the treaty was traded for only Rs 12,7 Billion by the government of Mauritius and these were used for the implementation of the Metro system, New Supreme Court, Electronic devices for primary students and specialised hospital.
MAURITIUS LEAK EPISODE
The International Consortium of Investigative Journalists (“ICIJ”) released a report showing how the position of Mauritius as a tax haven is detrimental to its African neighbours. The report was based on a USB stick obtained by journalists which contained 200,000 confidential records of a Bermuda based off-shore law firm Conyers Dill & Pearman which has an office in Mauritius. Dubbed “Mauritius Leaks”, Bob Geldof’s company was also found to be using Mauritius “to take advantage of obscure international agreements that allow companies to pay rock-bottom rates on the island tax haven and pay less to the desperately poor African nations where the companies do business.”
The Mauritius Government has acted with indignation at some of the allegations in the ICIJ report and says the information has been obtained illegally and “has been tampered with” and are “factually incorrect”.
In 2020, The European Commission added Mauritius to a new list of countries that pose financial risks to the European Union due to anti-money laundering and terrorism financing shortfalls.
REVAMPING THE FINANCIAL SERVICES SECTOR
It is high time for Mauritius to have the right person at the right place rather than political nominees being selected to perform the task of a Specialist. Transparency should prevail at the government level. Single and robust platform should be put in place to harmonize communication between FSC, FIU, ROC and Management Companies (“MCs”) in order to solve daily issues as well as high level issues. The following could be integrated:
- Including Fintech as recommended by the OECD.
- Abide with “The Forty Recommendations” by the OECD at all time
- Incentive to IM or IA to implement in Mauritius.
- Link SEMDEX with international stock exchange to attract more investment.
- Trade financing to be promoted with facilities for goods transiting via Mauritius.
- On-going inspections in all MCs without prior notice in order to assess whether the controls that have been put in place to combat Money Laundering and Terrorist Financing, are being adhered to.
- Statement of practise to be adopted by all MC (ISO Certified)
- Reinforcement of the existing law for corruption/money laundering
