Following reports in the Indian press on the integrity and trustworthiness of the international financial centre of Mauritius, Global Institutional Investors Forum (“GIIF”) wishes to dispel some misgivings and set the record straight.
We fully support the unrelenting fight of India against black money and money laundering. Mauritius has always fully collaborated with the competent Indian authority in this battle. Mauritius has often gone beyond the remit of the agreement to provide information to India. Mauritius has received around 64 requests for bank and tax information from India and the information has been duly submitted by the Mauritius authorities. Effective exchange of information exists between the Revenue Department of India and the Mauritius Revenue Authority and also between SEBI and Financial Services Commission (“FSC”). In addition India has set up a tax information office in Mauritius to strengthen and speed up the exchange of information.
Mauritius has since 2002 enacted internationally accepted anti-money laundering and anti-terrorist financing legislations. These require every bank, financial institution, cash dealer or member of the relevant profession or occupation to verify the true identity of persons with whom they conduct transactions and keep requisite records, registers and documents. Both FSC and Bank of Mauritius have issued codes regarding Customer Due Diligence on clients, including the ultimate beneficial owners, and their source of funds. Offence for non-compliance is punishable by severe penalties.
Mauritius has robust measures to prevent any round tripping of funds. There are detailed and specific rules to counter round-tripping of funds from India. Management Companies which are strictly regulated by FSC and which provide corporate services to international clients must give an undertaking to FSC that no shares shall be issued to Indian Residents against monies emanating from India. The ultimate beneficial owners are disclosed to the FSC. In addition, tax residency certificate is issued on an annual basis subject to companies renewing their undertakings on local substance in accordance with law and against round tripping. If found guilty of round tripping, management companies will have their licenses revoked. These strong deterrent policies have meant that Mauritius has not received a single complaint of round tripping from India.
Mauritius is on the OECD “White List” as a jurisdiction with acceptable tax standards and it complies with OECD norms and best-practice principles. It also fully cooperates with other competent authorities on effective exchange of information. In January 2011, OECD commented favourably on its transparency and exchange of information, the preventive measures and sanctions against alleged misuse of Mauritius’s treaty network. Mauritius is also recognised by the World Bank, the IMF, the Financial Action Task Force as a clean, transparent jurisdiction with a sound legal, regulatory and supervisory framework. Notwithstanding, Mauritius stands willing to strengthen, if required, the transparency and effectiveness of its exchange of information mechanism with India.
Mauritius is not the only country where the right to tax does not rest with India. India has similar agreements with many other countries. In some cases the provisions of their treaty are much better than with Mauritius. There are many other reasons besides tax planning for the choice of Mauritius as the preferred location for investors. These range from the skills and institutions available, the well-regulated and transparent financial sector, the geographical proximity, cultural affinities and long historical ties between India and Mauritius. Mauritius is also an excellent place for doing business, ranking first in Africa, and users are happy with the quality, timeliness and cost of services.
Mauritius has a diversified and resilient economy with economic substance. Financial services, of which international business forms a significant part, represents 13.5% of GDP. Global business is the major employer of the skilled labour force and contributes 22% of direct taxes and to the balance of payments.
Mauritius is a catalyst for attracting both FDI’s and FII’s to India, contributing to India’s spectacular growth over the last two decades with positive impact on economic growth, infrastructure development, export earnings, employment generation, and poverty alleviation.
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