Mauritius: a tax haven or just a low-tax jurisdiction?

Tax justice campaigners claim that Mauritius is a location for offshore companies to avoid taxation, but the government insist that it is just a low-tax jurisdiction. Does Mauritius fall under the term tax haven? This article will weigh up the facts and conclude the findings.

Is Mauritius a tax haven or just a low-tax jurisdiction?

Mauritius, officially the Republic of Mauritius is an island nation in the Indian Ocean about 2,000 kilometres off the southeast coast of the African continent. The national language spoken is French. Tax justice campaigners claim that Mauritius is a location for offshore companies to avoid taxation, but the government insist that it is just a low-tax jurisdiction. Does Mauritius fall under the term tax haven? This article will weigh up the facts and conclude the findings.

Mauritius can be defined as a tax avoidance haven.

Mauritius officially has a corporation tax of 15%, but tax credits for global business companies bring the rate down to 3% respectively. Incorporations pay no capital gains tax and no withholding tax on dividends.

Tax havens can be perceived as a means of tax avoidance which promotes the differential treatment of non-nationals. These jurisdictions compete on how low the tax rate can go, with some countries collecting only company registration fees and no tax at all. This allows companies to split themselves up and register holding companies, with leasing and management operations, in a jurisdiction where no tax is paid, and then artificially sends profits made elsewhere to the offshore fragment in order to avoid tax.

In 2009 the OECD tried to categorise jurisdictions by creating a 'black list,' 'grey list' and 'white list'. However by permitting countries to sign voluntary bilateral tax information exchange agreements the 'black list' was quickly removed. Mauritius is on the 'white list' officially.

Mauritius is a low-tax jurisdiction striving for more substance.

The vice prime minister and finance minister in Mauritius Xavier-Luc Duval is emphatic: "We're not a tax haven because there is no secrecy. You can't open a bank account here without giving your full details." Mr Duval supports the notion of Mauritius as a low-tax jurisdiction. "Every time we've brought down the tax rates, tax revenues have increased, so it's been done for genuine reasons" he explained. For a country like Mauritius, with no large government expenditure on the military, there is no need to overburden the population with taxation” he states.

It is relevant to make the comparison of the 25,000 international business companies (IBC) registered in Mauritius to the 375,000 in the Cayman Islands, and more than 1 million in the British Virgin Islands. "If we had wanted to be looking at quantity rather than quality, today we could easily have been at 250,000. But we decided to do otherwise" he also emphasises the government's policy push for companies registered on the island to have 'substance' to bring more to the economy of the island and to open substantial offices there and employ Mauritians.

To obtain a certificate of tax residency, a GBC 1 must have two local Directors, a local Auditor, a principal bank account in Mauritius and board meetings held and chaired in Mauritius. GBC 2s, of which there are more, have less demanding requirements.

Rama Sithanen, a former finance minister who was responsible for the reforms that introduced global business into Mauritius in 1994, states that striving for substance is important for Mauritius's reputation. "It's not a question of having shortcuts. We can't afford to do that because we need to have our reputation in all the other sectors of the economy. Mauritius is unique; we're not one of these small island economies that rely on 90% of its business being global business. This is a broad-based, vibrant, fully diversified and dynamic economy," he says.


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