GLOBAL BUSINESS : We have to call the bluff of scaremongers

Our stand depends where we sit. From a sitting position Government has chosen to shoot down our Global Business.
Why ?
Is it because it is a Sector where the circle of opportunities has been widened for our young professionals ?
This is a Sector where democratisation is firmly rooted and yet both the Minister of Finance and his colleague, Minister of Good Governance and Financial Services, use a sledgehammer to hit the anvil. Unsuccessfully, of course because our low tax jurisdiction has resilience and unlike this abrasive Government our Financial Services are here today and here to stay.
The framework of international taxation is undergoing further changes, some of a more important nature than in the past but it does not mean that we should overdramatise.
Mauritius has always complied with the changing canons of Global Taxation and participates actively in the Global FORUM of international taxation which has led discussions on taxation for more than a decade. It has always taken the lead to adopt new and continually changing standards of transparency and information, discouraged activities that were dubious or of little substance and stayed on the OECD whitelist of Offshore Centres by undergoing rigorous OECD led assessments. We were no less, if not more, white than low tax jurisdiction than Singapore.
Offshore centres will have to adjust to the new global tax environment that will emerge in the coming years as Centres implement the OECD BEPS guidelines. Base Erosion and Profit Shifting (BEPS) call for new rules on treaty shopping.
Our Global business adapts because of its buoyancy to comply. Mauritius has already agreed to introduce Limitation-of-Benefits (LOB) provisions in our tax treaty with India and a main purpose test to prevent primarily tax-driven business.
If there is a shortcoming, it is our inability to be on the offensive and the Financial Services Promotion Authority yet to take off ? Will it when the psyche of the Government is to settle score ?
It is not because the OECD Action plan on BEPS has been approved by the Ministers of G20 that both Ministers have to be hysterical and think of the worse to happen to the Global Business. There is no doomsday scenario but there are lessons to be drawn and learnt.
This Government with the tongue in the cheek refuses to learn and instead has opted for the worse to happen.
It missed an opportunity to wage an intensive lobbying mission in Europe to sensitise our partners on the merits of our Jurisdiction.
We have a legitimate right and moral obligation to defend the reputation of our Global Business. This is our common battle.
The relevance and importance of the Sector must bring all the forces (Government, Opposition, Private, Public sector, Professionals and Experts of the Diaspora) to Think and Act together.
We can always come back on missed opportunities and create new ones. Who would not volunteer to participate in an official delegation to Brussels to impress upon EU Commission and Parliament Representatives that their methodology is inappropriate, unfair and that Mauritius is a reliable partner to fight Fraud and Tax Evasion. Without fear or prejudice, we have always volunteered to disclose information to tax authorities. Our criteria to have a Resident Certificate are very strict and watertight. We are becoming a jurisdiction of Substance. In parallel, it could be envisaged to visit different EU capitals to demonstrate that we should be white listed in terms of Tax Governance. The object would be to avoid being on the Controlled EU list.
We canvassed forcefully
As I said earlier we Stand where we Sit and as a former Minister of Foreign Affairs, Regional Integration, International Trade, I stood for my good friend Hon. X-L. Duval, the then Minister of Finance, on two occasions, once in India and then in Abuja, Nigeria.
I did not shriek nor shy away from my responsibility and with the wise counsel of our diligent friends from private and public sectors we put across the case of Mauritius as a clean and neat Jurisdiction. Legitimate concerns were always expressed but we canvassed forcefully.
Our friends or detractors know that we are not insensitive or impervious to change.
In India despite firm reassurances from the all and mighty that nothing would be done to harm the economic interest of Mauritius we never slept on our laurels but firm instructions were given to the strategic and negotiating team led ably by the then acting SFA to be an angel with a tight fist.
The symbiotic relationship among all stakeholders made things simple and the support from the PM was exemplary.
To whom did I not reach out in India, from the former PM Manmohan Singh to the then Minister of Foreign Affairs, the mandarins of the Civil Service, former Governor of the Bank of India, private sector and the Press. We reached out for a better outreach.
The Times of India created an unnecessary controversy to mention I had agreed to a trade-off to secure the Double Taxation Avoidance Convention (DTAC). Despite an apology over the phone The Times of India refused to publish a rejoinder.
In Abuja, at the ministerial meeting of finance, our task was made arduous by Actionaid which staged a protest against Mauritius and Seychelles as tax havens allegedly depriving African states with which we have ratified DTAC of legitimate capital gain. This is the classical déjà-vu déjà-entendu phenomenon. Does it ring a bell ?
I paid careful attention to the African Union (AU) report on Illicit Funding submitted by Former South African President Mbeki. The findings highlighted revenue foregone but made no mention of any AU member state as a tax haven. However, much to my dismay the Liberian Minister of Finance did slight Mauritius and I promptly asked the floor to remind the distinguished audience of the host of measures we had put in place to turn Mauritius into a Financial centre of repute and a gateway for investment between Africa, Europe and Asia. Mr Chellapermal, Deputy FS, was of great help and our arguments prevailed and we reaped applause from the floor.
Many of the African jurisdictions with which we signed Double Taxation Agreements would not ratify until our treaty with India has been fully re-assessed. The strategic and negotiating team had different case scenarios but never gave in nor traded off on principles and fundamentals during negotiations. The document submitted to the former PM of India and his successor by Dr N. Ramgoolam, the then PM, was explicit.
The revised stand taken by the present Government has bamboozled a Nation which has entrusted a responsibility to Ministers who have surrendered and now desperate to retreat from a false dawn.
In the meantime they are trying to obtain some cheap political mileage on the endorsement of an Action Plan by G20 Ministers in Lima, Peru. There is no need to be hysterical or fatalistic over an elaborated plan.
The Action Plan is the outcome of the OECD working group based on 15 chapters. A plan on Governance, Transparency, Coherence amongst other thematics timely delivered after a 3-year gestation.
The Action plan as elaborated has silver linings much to the displeasure of Oxfam and Actionaid and any signatory country will have to report and to err on the side of caution. Every jurisdiction will have to introduce appropriate legislations with flexible provisions. The main highlight of Base Erosion and Profit Shifting (BEPS) is essentially to focus on a fairer tax treatment of Multinationals among countries.
Multinationals will be impacted by the country and country reporting being proposed to improve the country’s tax take, in better line with the activities of multinationals in that country and disclosure will be restricted to tax authorities.
Many advocates of a more effective reform of global taxation are claiming that BEPS offer newer and more complicated rules but not fundamental changes in the taxation paradigm. The new rules might lead to more tax competition among countries and a further race to the bottom.
USA and UK have resisted making fundamental changes either for the taxation of multinationals as a Single Entity and a sharing of the taxation among countries on objective criteria such as respective country revenues or for the curbing of controlled Foreign Corporations which allow resident corporations to avoid taxation by setting up overseas entities. Tax planning and minimisation may be reduced but will continue in the main Offshore Centres like London, Luxemburg, Singapore.
Why is Singapore not shouting hysterically like our Ministers ? Are they smarter or because they don’t engage in masochist flagellation?
We will have to comply with BEPS recommendations to avoid double NON taxation.
If we have to tweak to be a game changer then we have to be a game for change.
Global business is a serious business and we have to call the bluff of those who are scaremongers. Let us therefore continue our discussion with India in a spirit of genuine cooperation and to our mutual benefit.
This being said, for the future, it could also be worth to have a dedicated think-tank to come up with improvements for the Mauritian laws and business environment. The objective would be to independently assess how Mauritius can effectively be beyond reproach.