Mauritius as an offshore financial centre and laws relating to tax avoidance and evasion

DOIhttps://doi.org/10.1108/JFC-08-2020-0160
Published date09 November 2020
Date09 November 2020
Pages548-565
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorAmbareen Beebeejaun
Mauritius as an of‌fshore f‌inancial
centre and laws relating to tax
avoidance and evasion
Ambareen Beebeejaun
University of Mauritius, Reduit, Mauritius
Abstract
Purpose While Mauritius is ranked as the fastest growing f‌inancial centre in Africa and the second-
fastest-growing offshoref‌inancial centre (OFC) in the word by the New World Health in 2019, the country is
facing severe allegations that itis progressing at the expense of other developing countries. In this respect,
this paper aims to assess the contributionof the Mauritius OFC, the robustness of tax avoidance and evasion
laws, the endeavours undertaken by the Mauritius Government to promote Mauritius OFC and the alleged
classif‌icationof Mauritius as a tax haven.
Design/methodology/approach To achieve the above research objectives, this paper will adopt the
black letter approach. That is, the relevantlegislation and case laws will be scrutinised. Also, books, journal
articles, newspaper articles, reports from international bodies amongst others will be used. The research
methodology also comprisinga critical analysis which implies that existing studies conducted onthe subject
matter of this research will be assessedand the extent to which the researcher agrees with the existing work
will be weighed.
Findings Based on the critical analysis, this paper recommends that the Mauritius Income Tax Act be
amended to provide for punitive and corrective actions for those engaged in impermissible tax avoidance.
Additionally, for transparency and clarity, it is suggestedthat the Mauritius Revenue Authority (MRA) clarif‌ies
in a practice note the factors that it considers when determiningthe tax liability that should have been payable or
when detecting tax avoidance cases. Similarly, to discourage tax evasion,the f‌ines and penalties for tax-evading
offences should be more strict and a regulatory framework for tax practitioners need to be set up.
Originality/value To the authors knowledge, this paper is amongst the f‌irst academic research that
emphasises the position of Mauritius as an OFC and critically analysed the related laws relating to the
f‌inancialworld.
Keywords Mauritius as a tax haven, OECD def‌inition of tax haven, Tax avoidance in Mauritius,
Tax evasion in Mauritius, Anti-avoidance provisions in Mauritius
Paper type Research paper
Acronyms and Abbreviations
DTAAs = Double Taxation Avoidance Agreements;
EU = European Union;
FSC = Financial Services Commission of Mauritius;
IPPAs = Investment Promotion and Protection Agreements;
OECD = Organisation for Economic Cooperation and Development; and
OFC = Offshore Financial Centre.
Introduction
Tax is a compulsory levy that needs to be paid to the governmentwhich is based on income
or cost of goods and servicesconsumed. In Mauritius, there is no specif‌ic statutory def‌inition
JFC
28,2
548
Journalof Financial Crime
Vol.28 No. 2, 2021
pp. 548-565
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-08-2020-0160
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
of tax but the taxation legal framework encompasses various pieces of legislation such as
the Mauritius Income Tax Act 1995, the Value Added Tax Act 1998, the Stamp DutiesAct
1991 amongst others.
Indeed taxation impacts directly on the attractiveness of a country when considering
investment opportunities.In this respect, the competitive tax rates of Mauritius have helped
in underpinning an inf‌lux of investments in the country over the past 10 years. In addition,
coupled with the tax framework, the various endeavours undertaken by the Mauritius
Government have contributed to making Mauritius the fastest growing f‌inancial centre in
Africa and the second-fastest-growinginternational f‌inancial centre in the world after China
(New World Wealth, 2019). However, despite being on the Organisation for Economic
Cooperation and Development (OECD) whitelist, Mauritius is often accused by the
international press as a tax haven, one example of which refers to the accusation made by
Paradise Papers in 2017 on some Mauritius resident companies operating in the global
business sector. Additionally, international media often blames Mauritius for boosting its
economy at the expenseof other African countries.
The area of tax law is one that is debatable particularly when issues of tax avoidance,
evasion and tax haven are concerned. Hence, this research intends to assess the role and
contribution, as well as the status of the offshore f‌inancial sector of Mauritius based on
concrete facts such as the legislations surrounding taxes in Mauritius, the formal
endeavours undertaken by the Mauritius Governmentand criteria set by global recognised
standard-settinginstitutions such as the OECD. This will be carried out to ascertain whether
Mauritius falls within the category of tax haven or not, and whether the country is
progressing at the expense of others. Consequently, this research paper will discuss on the
fairness and accuracy of the OECDs fairnesson its criteria for categorising countries as tax
havens. Furthermore, the subject of tax evasion and tax avoidance will each be examined
and the robustness of the Mauritius legal framework on these topics will be assessed. For
this purpose, this research paper will emphasise on existing studies carried out on tax
evasion and tax avoidance. Finally, this paper will assess the eff‌iciency of the numerous
effort being undertaken by the Mauritius Government on both the local and international
front to make the country a clean and transparentoffshore f‌inancial centre (OFC).
To achieve the above research objectives,this paper will adopt the black letter approach.
That is, the relevant legislation and case laws will be scrutinised. Also, books, journal
articles, newspaper articles, reports from international bodies amongst others will be used.
The research methodology also comprising a critical analysis which implies that existing
studies conducted on the subject matter of this research will be assessed and the extent to
which the researcheragrees with the existing work will be weighed.
Background
Mauritius is a developing country that is located in the Indian Ocean and the Gross
Domestic Product of Mauritius is USD 14bn as at 31
st
December 2018 (MCCI, 2018). As the
countrys independencein 1968, Mauritius has transitioned from a poor sugar economy into
one of the most remarkable f‌lourishing economies in Africa. This economic development is
attributed mainly to a long history of political stability and good governancein addition to
the growing corporate, information and telecommunication technology and tourism sectors
in Mauritius. As of 31
st
December 2018, the tertiary economic sector comprises of 63.9% of
the entire Mauritian economy as compared to the secondary sector being 19.1% and the
primary sector being 17% of the Mauritian economy (MCCI, 2018). In essence, Mauritius is
recognised as an international f‌inancial centre for conducting business and acts as a
gateway to Africa and Asia. Furthermore,following the collaboration of the London Court of
Laws relating
to tax
avoidance and
evasion
549

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