OECD Model Tax Convention : a discussion draft on the meaning of “beneficial owner” is released

The OECD Committee on Fiscal Affairs (CFA) invites public comments on draft changes to the Commentary on Articles 10, 11 and 12 of the OECD Model Tax Convention concerning the meaning of the term “beneficial owner”.

The term “beneficial owner”, as used in these Articles of the Model Tax Convention, has given rise to different interpretations by courts and tax administrations. Given the risks of double taxation and non-taxation arising from these different interpretations, the CFA has developed proposals aimed at clarifying the interpretation that should be given to that concept in the context of the Model Tax Convention.

This discussion draft includes the proposed changes to the Commentary on Articles 10, 11 and 12 of the Model Tax Convention. The Committee invites interested parties to send their comments on this discussion draft before 15 July 2011.

This discussion draft has been prepared for the purpose of inviting comments from interested parties. It will be reviewed in the light of the comments received. It does not necessarily reflect the final views of the OECD and its member countries.

Bermuda Fund Regulations open to Islamic Investment Funds

New BMA Guidance complements Bermuda’s Islamic Finance Business Development Initiative

The Bermuda Monetary Authority today announced that it has published Guidance Notes that facilitate establishing Islamic investment funds in Bermuda. The Guidance Notes will help prospective applicants looking to establish such funds to comply with Bermuda’s funds regulations, specifically the Investment Funds Act 2006. They also complement Bermuda’s efforts to promote the jurisdiction as a domicile of choice for Islamic financial products.

Commenting on the new Guidance Notes, Jeremy Cox, CEO of the Authority said, “The Authority is pleased to confirm that Bermuda’s regulatory framework can accommodate these types of products. By issuing the Guidance Notes we are helping the market take advantage of this potential business opportunity for Bermuda, while ensuring the sector remains appropriately regulated. As Bermuda’s financial services regulator, the Authority is keen to ensure that this jurisdiction upholds the highest standards in regulation, while at the same time maintaining a regulatory environment that supports business growth and development. This development is a clear example of the Authority’s work in this regard.”

The Authority drafted the Guidance Notes following a review it conducted of Bermuda’s regulatory regime for investment funds. The review found that there was no impediment to authorising Islamic investment funds in Bermuda under the current framework. However, the Notes provide guidance on a number of issues which such funds may need to consider in complying with the existing regulatory framework, such as required disclosures, notification of material changes, and the role and responsibilities of the Shariah Supervisory Board, a body required under Islamic law to ensure such fund products conform to Islamic principles.

Indian Investors Exposed to Business Opportunities in Mauritius

An interactive session between the Indian private sector delegation and representatives of the Government of Mauritius was held yesterday at the Cyber Tower 1 in Ebène at the initiative of the Board of Investment (BOI). The business meeting served as a platform for the Indian investors to discuss and explore investment opportunities in various sectors of the Mauritian economy.

The interactive session was attended by around fifty members of the Indian business community who are currently in Mauritius in the context of the State Visit of the President of the Republic of India, H.E Smt Pratibha Devisingh Patil. The business delegation was headed by Mr Navin M. Raheja, Managing Director of the Raheja Developers Ltd, while the Mauritian side was led by the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Pravind Jugnauth, accompanied by six Ministers.

Discussions focused on the development of new economic avenues and sectors in Mauritius in addition to the consolidation of the competitiveness and attractiveness of existing sectors which are the financial services, manufacturing, ICT/BPO, logistics, tourism, hospitality and property development that contribute largely to economic growth. The investors were also exposed to a presentation given by the BOI on an overview of the economic activities in Mauritius in particular the emerging sectors such as the centre of excellence for education, innovation and research, medical hub, renewable energy, seafood and aquaculture. Mauritius was also showcased as an investment gateway to emerging markets on the business front. As regards the ease of doing business, Mauritius is ranked first in Africa and is among the top twenty economies across the world.

Addressing the investors, the Vice-Prime Minister, Mr Jugnauth, reiterated the wish of the Prime Minister of Mauritius and that of the President of the Republic of India to further consolidate the strong bilateral economic cooperation and business ties between the two countries. He recalled that Mauritius has welcomed over the past years a number of Indian companies which are contributing to the economic betterment of the country across various sectors of the economy and which are also generating a significant amount of employment.

According to Mr Jugnauth, to triple the GDP per capita from USD 20 000 and achieve the target of GDP MUR 1 trillion before the end of the 2020s, the country will require massive investments in the physical infrastructure which include airport, port, road network, digital connectivity and transport systems. He, therefore, calls for a higher investment from the public and private sectors from both domestic and foreign sources and urges them to tap opportunities offered by the wider regional market and made an appeal to Indian service providers and investors to use Mauritius as an additional platform from which they can provide financial and legal services and structure their international investments, especially into Africa.

Mr Jugnauth also stressed that the diversification of the Mauritian economy remains a major development thrust and that the government is intensifying its efforts towards transforming the island into a world class tax-free shopping, business and leisure activities and that various key actions are being undertaken to position Mauritius as an investment platform between Africa and Asia.

It will be recalled that economic ties between India and Mauritius date back to the 1800s and India remains the main import, economic and investment market for the country. For the year 2010, Indian exports to Mauritius stood at approximately USD 1.1 billion, representing about 22.3% of the Mauritian total exports. Total investments from India account to nearly MUR 2.9 billion thus positioning India as the second single most important foreign investor in Mauritius. On the other hand, outward investments from Mauritius by Mauritian nationals into India stood at about MUR 1.1 billion and the main sectors attracting Mauritian investment in India include banking and financial services, textile, logistics and travel amongst others.

Treasure Islands

James R. Hines

Journal of Economic Perspectives—Volume 24, Number 4—Fall 2010—Pages 103–126

In movies and novels, tax havens are often settings for shady international deals; in practice, they are rather less flashy. Tax havens, also known as "offshore financial centers" or "international financial centers," are countries and territories that offer low tax rates and favorable regulatory policies to foreign investors. For example, tax havens typically tax inbound investment at zero or very low rates and further encourage investment with telecommunications and transportation facilities, other business infrastructure, favorable legal environments, and limited bureaucratic hurdles to starting new firms. Tax havens are small; most are islands; all but a few have populations below one million; and they have above-average incomes. The United States and other higher-tax countries frequently express concerns over how tax havens may affect their economies. Do they erode domestic tax collections; attract economic activity away from higher-tax countries; facilitate criminal activities; or reduce the transparency of financial accounts and so impede the smooth operation and regulation of legal and financial systems around the world. Do they contribute to excessive international tax competition? These concerns are plausible, albeit often founded on anecdotal rather than systematic evidence. Yet tax haven policies may also benefit other economies and even facilitate the effective operation of the tax systems of other countries. This paper evaluates evidence of the economic effects of tax havens.

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Global hedge funds' assets up 13 per cent in 2010

• Hedge funds' assets up 13% in 2010 to $1.9 trillion, with further recovery to pre-crisis levels likely by end of 2011
• Net inflows of funds totalled $65bn in 2010 following two years of decline
• Fund of hedge funds' assets grow 10% in 2010 to $550bn, a third below peak from three years earlier
• London remains second largest centre for managers of hedge funds with 19% of global assets

Global hedge funds' assets increased by 13% in 2010 to $1.9 trillion, the second successive year of growth according to TheCityUK report Hedge Funds 2011. Barring further economic turbulence, growth is set to continue in 2011, with funds under management likely to recover to pre-crisis levels by the end of the year.

Growth in assets in 2010 was due both to a 10% performance return during the year and a $65bn net inflow of funds, as net asset flows turned positive for the first time in three years. Prior to this, hedge funds saw a surge in redemptions and fall in liquidity, particularly in the latter part of 2008 and first half of 2009. The number of hedge funds totalled over 9,500 at the end of 2010, with new hedge funds launches outpacing fund liquidations for the first time since 2007.

The fund of hedge funds industry has been particularly affected by the economic downturn of the past two years and reputational damage resulting from the Madoff fraud. Assets of fund of funds totalled $550bn at the end of 2010, up 10% from the previous year, but over a third below the peak seen three years earlier.

TheCityUK estimates that 41% of global hedge fund assets were managed from New York in 2010, down from over 50% a decade earlier. London's 19% share of the global total was slightly down on the previous year mainly due to quicker growth in hedge funds' assets in North America than in Europe during 2010. London has more than doubled its share of global hedge fund assets during the past decade.

Marko Maslakovic, Senior Manager, Economic Research at TheCityUK said: "The 700 hedge funds located in London manage around 70% of European based hedge funds' assets. The structural advantages which have long attracted hedge funds to London include its local expertise and the proximity of clients and markets. London is also a leading centre for hedge fund services such as administration, prime brokerage and custody".

Share of Global Hedge Fund Assets Under Management by Geographical Region
	Global assets ($bn)	% share of global assets
		London	Other Europe	New York	Other US	Other
2000	410	8	4	52	30	6
2007	2,150	20	2	40	17	21
2009	1,700	20	3	41	17	19
2010	1,920	19	3	41	17	20
Source: TheCityUK estimates

Hedge Funds 2011(.pdf, 799kb)

Global Institutional Investors Forum ("GIIF")

The Global Institutional Investors Forum (“GIIF”) is a non-profitable, charitable purpose trust set up to represent and promote the views and interests of global investors using Mauritius as an investment jurisdiction. GIIF works with global investors, the Government and local institutions to promote and develop Mauritius as a transparent and well regulated jurisdiction.

FORMATION , STRUCTURE & MODE OF OPERATION

The legal form of GIIF is a charitable, purpose trust. A purpose trust is a binding fiduciary agreement made to fulfill a particular purpose. The trust assets are managed by the Trustees and an Enforcer is appointed to make sure that the purpose of the Trust is fulfilled. GIIF currently has three trustees: Cim Trustees (Mauritius) Limited as qualified trustee (represented by Steve Flynn of Cim Global Business in Mauritius), Dev Joory, of IFS in Mauritius, and Mrs Aisha Timol of the Mauritius Bankers Association (“MBA”). The enforcer of the trust is Me Marc Hein of Juristconsult Chambers.

The Trustees have established an Advisory Council to advise and guide the Trustees on strategic issues. The Council members that have been appointed are Messrs Sunil Banymandhub, Iqbal Rajahballee, Philip Baker QC, Dinesh Kanabar of KPMG India and Nishith Desai from Nishith Desai Associates.

GIIF holds its Operational Committee Meeting on a fortnightly basis. This is attended by the Trustees, few members of GIIF and the GIIF Secretariat. An Advisory Council meeting is held as and when required.

PURPOSES OF GIIF AS PER ITS TRUST DEED

“The Trust is established for the purpose of creating and running a forum to be known as “Global Institutional Investors Forum” of which foreign investors investing globally and other stakeholders interested in foreign investment worldwide, using Mauritius, (together the “Stakeholders”) can become members or contributors and through which:

• the views and concerns of the Stakeholders in regard to proposed or actual regulatory, legal, or fiscal changes in respective countries concerning their investments which might impact adversely the interests of the Stakeholders can be channelled;
• effective steps directly or in conjunction with persons or organizations with similar objectives or purposes can be taken on behalf of Stakeholders to ensure that the provisions of such changes are as far as possible not detrimental to the Stakeholders and facilitate and encourage foreign investment.
• formulate debates, suggestions and ideas for furtherance of the interests of the Stakeholders, both globally and in Mauritius
• professional advisers and other organisations and persons may be engaged in furtherance of the Purposes.”