Wärtsilä supplies 67 MW Smart Power Generation power plant to Mauritius

Wärtsilä will supply a 67 MW Smart Power Generation plant to Mauritius. The order includes four Wärtsilä 46 engines running on heavy fuel oil. The equipment will be delivered in late 2016, and the plant is scheduled to be operational by September 2017. 

“Wärtsilä has been our trustworthy and professional partner for over 10 years. Their solutions are among the best in the market for producing reliable and highly efficient electricity with low emissions and low noise levels,” says Martin Kok Jensen, Sales and Marketing Director at Burmeister & Wain Scandinavian Contractor A/S (BWSC). The company is the EPC contractor for this project for which Wärtsilä will deliver the engines, equipment and engineering.

Economic growth and a growing tourism industry have caused an increase in energy consumption in Mauritius. To meet the rising demand, the retired diesel generating sets at the St Louis Power Station will be replaced with Wärtsilä engines. The reliability of the grid is extremely important for an insular country like Mauritius. The modernised power station will provide semi-baseload power, including daily starts and stops, to the local residents and industries. 

According to Bloomberg New Energy Finance, the country has set a target of having renewable energy comprise 35% of the total power generated by 2025. “By compensating for the gaps in the intermittent output of renewable sources, this fast-reacting plant will be able to support in renewable energy integration,” says Joost Bos, Business Development Manager at Wärtsilä.

Upon completion of this project, Wärtsilä and BWSC’s joint track record in Mauritius will be a significant 200 MW, which represents some 25 percent of the country’s total capacity. In Africa, Wärtsilä’s total installed base is 6500 MW in 46 countries.

Richard Samuel - Banks, politics, and the financial crisis: a demand for culture change (Part 1)

On 31 December 2015 the FCA abandoned the Thematic Review of Banking Culture it had in its business plan for that the following year, leaving the issue of culture change to the BSB/BSRC – in other words to the banks themselves. The reaction of the public so far suggests a further collapse in trust in both regulator and banks. Will this really go away?

See more

Richard Samuel is a barrister at 3 Hare Court, London. His article ‘Tools for changing banking culture: FCA are you listening? Why the FCA’s IRHP mass dispute resolution system has failed and what the FCA can do about it’ is published in Capital Markets Law Journal (Volume 11, Issue 2)

Moody's: Mauritius's resilient economy and ample liquidity support its Baa1 rating

Mauritius's diversified and resilient economy support its Baa1 rating with a stable outlook in the face of an unfavorable external environment, Moody's Investors Service ("Moody's") said in an annual report published in the past week.

The country has successfully attracted foreign investment, mainly in the financial sector, in part due to its proactive efforts to create a business friendly environment. Its stable political environment and diversified exports are also supportive.

The report, "Credit Analysis -- Government of Mauritius", is now available for Moody's subscribers. The research is an update to the markets and does not constitute a rating action.

"Mauritius's relative economic diversification and wealth, as well as the authorities' proactive economic policy stance have been key supports," said Lucie Villa, Vice President -- Senior Analyst and the report's co-author. "Yet despite Mauritius's undeniable economic success, there are still structural constraints to higher levels of growth, especially related to infrastructure shortcomings, and deficiencies in the labor market, among other areas."

The Indian Ocean island nation's economic outlook remains healthy, and Moody's forecasts real growth for 2016 and 2017 of 3.6% and 3.7%. The announced changes to the Double Taxation Avoidance Agreement ("DTAA") with India will likely only have a modest impact on growth due to the country's sectoral and geographic diversification.

A substantial deterioration of government debt metrics or increased external vulnerabilities would exert downward pressure on the Mauritian government's rating. Conversely, a significant and permanent reduction in Mauritius's vulnerability to external volatility and shocks would put positive pressure on the rating.

Mauritius's complex financial sector constitutes its main source of systemic risk, and while a potential vulnerability, the sector has been the principal source of foreign exchange earnings.

The authorities face the challenge of continuing to foster investment, critical for ensuring Mauritius's macroeconomic stability, and supporting the government's ability to raise funding and consolidate its finances.

Moody's assesses Mauritius's fiscal strength as "Moderate", reflecting a history of high government debt, which stood at 59% of GDP at the end of 2015. Debt affordability is moderately high.

Moody's believes that these metrics are unlikely to change within the coming two years.

The annual Credit Analysis elaborates on Mauritius's credit profile in terms of Economic Strength, Institutional Strength, Fiscal Strength and Susceptibility to Event Risk, which are the four main analytic factors in Moody's Sovereign Bond Rating Methodology.

EY 2016 Worldwide Corporate Tax Guide

Governments worldwide continue to reform their tax codes at a historically rapid rate. Taxpayers need a current guide, such as the Worldwide Corporate Tax Guide, in such a shifting tax landscape, especially if they are contemplating new markets.

The content is straightforward. Chapter by chapter, from Afghanistan to Zimbabwe, we summarize corporate tax systems in 162 jurisdictions. The content is current on 1 January 2016, with exceptions noted.

WSJ: What is a bank? A series exploring the existential crisis facing banks in 2016

Banks are in the midst of an identity crisis. An exploration into the state of the banking business

ATMC: Malicious and Misleading TV Broadcast on the Mauritius Jurisdiction by India Today

The Association of Trust and Management Companies (ATMC) refers to the malicious and misleading TV broadcast on the Mauritius jurisdiction by India Today on 24 May 2016 entitled ‘How Agusta kickbacks were channelled from Mauritius into India’ (the “Broadcast”). We strongly condemn the Broadcast which in our view, amounts to cheap and sensationalist reporting masquerading as investigative journalism and wish to clarify as follows:

1. The Broadcast solely and naively relies on the comments of one person to brush a wide canvas of deceit where it accuses a whole country of money laundering! Sweeping statements like ‘Mauritius is a fertile market for operatives like … courtesy of local laws’ or “Once the shell company is formed, the Mauritian kickbacks factory blossoms with hundreds of consultants suddenly available to work the scam” only highlights the gullibility of the two Indian under cover so-called reporters and the editors of India Today who just believed their interlocutor at face value!
2. The objective of India Today seemed to have been to show how allegedly dodgy funds entered India through Mauritius without any control. We highlight that, in fact, stringent customer due diligence procedures prevail in Mauritius both at the onset of any business relationship and on an ongoing basis, including the identification of sources of funds. India Today appears to be totally unaware or has maliciously ignored the fact that Mauritius has been rated as “largely compliant” by the OECD’s Global Forum on Transparency and Exchange of Information for Tax purposes.
3. India Today would surely remember the Satyam Computer Services (SCS) scandal that shocked India and the world in 2009 where the chairman of SCS, Ramalinga Raju confessed that the company's accounts had been falsified. The SCS scandal was an isolated criminal act. Would India Today blame India and its population for that scam as well? Did India Today consider the possibility of an isolated criminal act limited to their interviewee only involving falsified documents at any stage of the alleged scam or the possibility of funds having been channeled to Mauritius through A-rated banks and supported by genuine due diligence documents i.e where already clean money entered and left Mauritius?
4. The Global Business sector in Mauritius is well regulated and India Today has provided no tangible reason/evidence to support its blatantly incorrect statement that a GBC1 could be “the key to funneling kickbacks.” It is a verifiable fact that a GBC1 is subject to enhanced due diligence when its objective is to invest in India. The two Mauritius companies allegedly linked to the scandal were Category 2 Global Business Licence companies (i.e GBC2) and NOT GBC1! A GBC2 company is not tax resident in Mauritius for treaty purposes and cannot therefore benefit under the Mauritius India tax treaty or any other treaty but is nevertheless subject to regulatory and reporting requirements to Mauritius authorities. In fact, India could fairly easily attempt to tax any income or gains of the GBC2 related to the funds transferred to India by the GBC2 companies! The India Today’s amateur sleuths are lucky that they did not pay for the advice that they received from the person they interviewed as his advice appears to not only be totally flawed but also factually incorrect!
5. ML ADMINISTRATORS LTD is not a member of the ATMC and we draw attention to the Communiqué issued on 26th May 2016 by the Financial Services Commission of Mauritius in respect of this matter. 

India Today is entitled to its opinion relating to the person who was interviewed. The ATMC considers however that the Broadcast has caused prejudice to operators in the global business industry, to the reputation of Mauritius as an International Financial Centre and to Mauritius as a sovereign nation. The ATMC calls on India Today to do the honourable act of retracting its malicious statements that malign Mauritius as a whole.

Press Release

Fin du DTAT: Lorsque la communication devient déroutante…

La communication autour de ce qui est advenu au traité DTAT entre l’Inde et Maurice recèle une maladroite diversion. La critique épargne le responsable des malheurs qui frappent aujourd’hui notre secteur offshore. Les uns mettent de l’avant les grands efforts de l’Inde et l’argent qu’elle nous donne en consolation. Les autres tirent sur les manquements du négociateur. Pour la population, c’est de la communication poudre aux yeux.

Week-End

Dan Maraye: “Le traité renégocié va porter un coup de frein au secteur offshore”

Notre invité de ce dimanche est Dan Maraye, expert comptable et observateur politique. Il partage son analyse sur le traité de non-double imposition renégocié par Maurice avec l’Inde et ses conséquences sur le secteur offshore local. 

Week-End

Banque de Maurice: Une poussée d’inflation… sémantique

Est-ce bien à Week-End qu’était destinée la «patente» de la The Bank of Mauritius (BOM) ? Ou visait-elle à répondre par anticipation aux interpellations parlementaires de Raffick Sorefan?

China Offshore 6th Annual Company Formation Guide 2016

China is seeing offshore incorporations increasing in an unprecedented pace in the past year, the selection of the jurisdictions is also expanded from popular to those not-so-popular locations. In the meantime, Chinese government has continued to loosen its exchange control; the internationalization of the Chinese yuan is also picking up the pace with the support of the central government. 

This guide has included substantial information of the offshore industry for you to dive deeper into the knowledge base. And as always, we wish this brochure would serve its purpose to become a platform for knowledge exchange and a source for information and experience sharing.

Rajiv Servansingh: Open Letter to the Prime Minister of India Shri Narendra Modi

We are taking the liberty of writing this open letter to you although we are acutely aware that you must be extremely busy and preoccupied with the immensity of the task of governing the Republic of India at this most critical time of its history. Your frequent travels to foreign nations as indeed your first diplomatic initiatives for your inauguration as Prime Minister have been a clear indication of your concern to re-establish your country in its right and appropriate place in the new and shifting global order. India is today the fastest growing among the economic giants of the planet.

Excerpts:

“Reassured by the regular pronouncements of several Indian leaders over the decades about the ‘special relationship’ between our two nations, we have developed - rather naively it turns out - a false sense of security based on the oft-repeated commitment that India would never undertake any action which would somehow hurt the interests of Mauritius. Maybe we should have been wiser and paid heed to the dictum that in the international power game there are indeed no permanent friends but only permanent interests...”

“The Mauritius-India ‘special relationship’ is so embedded in our history that even the British colonial authorities could not fail to reckon with it. When the colonial government in India imposed an import duty on sugar in 1895, the then Governor of Mauritius, Hubert EH Jerningham wrote the following to the Secretary of State for the Colonies on 24th November 1896: “ … call your attention to the fact that 250,000 Indians who are labourers... are entirely dependent upon that industry… whether India might not be approached with a view to at least giving other British dependencies, and especially a Colony like this which provides a means of existence to so large an Indian population, the benefit of an exemption.” O tempora! O mores! Oh the times! Oh the customs!...”

Mauritius Times

Sushil Khushiram: The India Tax Treaty Amendment

The signature of an amending protocol to the India-Mauritius tax treaty has brought to a close a long and arduous process of negotiations between the countries, spanning over two decades.

Excerpts:

“The terms of the Treaty Protocol amendment are widely at variance with the official line taken by the Mauritian authorities in negotiations until last year. Mauritius was willing to make two concessions, namely (i) to adopt a LOB, provided that capital gains tax exemption, termed as “sacrosanct”, is maintained, and that GAAR does not override Treaty provisions, and (ii) to accept a main purpose test for the interest clause. Mauritius was also agreeable to the latest revised standard of an automatic exchange of information...”

“Global business and related activities are estimated to account for up to 5% of GDP, of which Indian treaty business represents at least two thirds, or a value added of about Rs13 bn annually. To sustain global business sector growth in the event of declining share investments, it is hoped that Mauritius can transmute into a debt-based jurisdiction. A new avenue for debt-related investments into India could emerge on the strength of the broadened interest clause in the amended treaty, and of the continuing capital gains tax exemption on debt instruments...”

Mauritius Times 

Mauritius: FSC issues an Interim Direction to ML ADMINISTRATORS LTD with respect to Mr Shakil Fakeermahamod

The Financial Services Commission has today, 26 May 2016, issued an interim direction to ML ADMINISTRATORS LTD to remove Mr Shakil Fakeermahamod as its director and Money Laundering Reporting Officer.

Bank of Mauritius: Guideline on Corporate Governance

The guideline is issued under the authority of section 50 of the Bank of Mauritius Act 2004 and section 100 of the Banking Act 2004. The guideline applies to banks, non-bank deposit-taking institutions and cash dealers. The guideline shall come into effect on 1 June 2016.

Dans un communiqué : la BoM règle ses comptes

Y aurait-il des tentatives pour déstabiliser la direction de la banque de Maurice (BoM)? C’est ce que l’on pense à la Banque centrale. Raison pour laquelle l’institution a répliqué, par un communiqué virulent et kilométrique, à un article publié dans un hebdomadaire, le week-end dernier, qui alléguait notamment que les finances de la banque seraient dans le rouge.

Sushil Khushiram - DTAA: Balance of payment effect

It is indispensable that a thorough review of the strategy and prospects for the financial services industry be conducted. The succession of negative shocks, foundering institutions, and a widening gap in policy credibility, are undermining the stability of the financial sector, which could lead to a searing crisis of confidence in the absence of corrective action.

L'Express

India Today: How Agusta kickbacks were channelled from Mauritius into India

While the probe by Indian agencies into the AgustaWestland VVIP chopper deal scandal continues at snail's pace, India Today has managed to dig in explosive revelations surrounding the country's biggest arms scandal since Bofors. 

India Today has managed to track down the cash trail in the AgustaWestland chopper deal to Mauritius.

IFC Review: “Disappointed” Protectors

Shan Warnock Smith and Andrew De La Rosa examine the role of trust protectors and provide an update on recent trust litigation cases.

IFC Review

FSC Mauritius issues Circular - Payment of fees 2016-17

The Commission hereby reminds all licensees / Registered / Authorised / Approved persons who are required to pay their annual licence renewal fee that the due date for payment of 2016/2017 licence fee is 1 July 2016.

Bank of Mauritius - Public Notice: Response to a Press Article

The Bank of Mauritius notes that there is an on-going attempt to discredit its management. This Public Notice is not intended to cause prejudice to whomsoever and it must be read in that spirit.

In response to an article that appeared in a weekend newspaper making unwarranted allegations with regard to the operation of the Bank of Mauritius, the management wishes to provide the public at large with some clarifications.

Interview – Indian High Commissioner HE Shri Anup Kumar Mudgal

“Our relationship transcends politics, economics, or other developments”

* ‘The revised India-Mauritius DTAC provides certainty and predictability to the financial services sector on both sides’

Mauritius Times

Winds of Change in international diplomacy

Things have changed in international diplomacy, and this process of change is going on. People here may say that all this is not the concern of a small country like Mauritius and that all we should do is to adapt to the great geopolitical changes taking place. But let’s face the reality. Despite all the usual talk about long-standing affinities with Mauritius, the 10th May 2016 saw the tax treaty between Mauritius and India overturned putting under grave threat a whole global business sector of Mauritius that had got used to relying heavily on that treaty to do international financial business.

Mauritius Times

DTAA - From cooperation to revision

When PM Modi made the Indian Ocean islands of Sri Lanka, Mauritius and Seychelles the subject of one of his first overseas trips, our destination was favoured and honoured not only by the timing (coinciding as Guest of Honour at our National Day celebrations) and the optimistic mood that bathed two leaders and two countries that had just witnessed a sweeping electoral change of guards. Both leaders had undoubtedly made landmark promises to their respective electorates but most observers here naturally expected that our common tryst with geography, history and culture, our confident strategic relationship extending far beyond friendship between India and its most loyal friend and ally in this part of the world, would be taken to new heights.

Excerpts:

“The Indian Ocean routes channel major and strategic maritime traffic and securing such trade had long been left to traditional superpowers, although China, not particularly keen to prolong such strategic dependence on the West, was increasingly using mega-bucks financing to help project its rising naval muscle in an area where it had little geographical or historical legitimacy. PM Modi, determined to take India on a carefully planned new geopolitical trajectory as a regional power, could not remain insensitive to its own “backwaters”. India of course has had a massive role in all sectors of our economy but Modi clearly felt the urge to alter years of “benign neglect” on the security and strategic fronts...”

“At the end of this strategic visit (of Narendra Modi) in March 2015, there was no cloud on the horizon, there was no inkling that the cooperative spirit to limit abuse of the DTAA from the two statesmen, could in July 2015 turn into a source of considerable controversy locally, putting our banking and offshore financial sector under heavy risks, with potential contagion to other economic spheres, if we go, that is, by the IMF and Moody assessments. What turned sweet grapes so sour in those four fateful months? Was it just a matter of amateurism and inexperience of technical and political staffers, facing vastly more astute and resilient Indian counterparts?”

Mauritius Times

Anil Gujadhur: Economic Headwinds

The bull should be taken by the horns if we really want to face the challenge posed by the current weakening of our global business sector

On 10th May, the government signed up a protocol amending the principal clauses of our Double Tax Avoidance Agreement (DTAA) with India. The overall impact of the amendments due to take effect as soon as the two countries have ratified them has been judged to be negative for the economy.

The first signal of this impending negative impact was given by the International Monetary Fund (IMF) in its latest Article IV Consultation Report released in March 2016. The IMF stated, amongst others, that “the authorities face macro-financial challenges stemming from the recent collapse of a large financial conglomerate, which affected the real economy, as well as risk exposures and potential spillovers from the massive offshore sector and its sizeable inter-linkages with domestic banking activities. These challenges, discussed in the FSAP and in the consultation as a macro-financial pilot, require a significant strengthening of the macro-prudential and financial stability policy frameworks.” The IMF must have been aware of the amendments our July 2015 official delegation to India with regard to Treaty negotiations had already conceded to, which surfaced up on 10th May 2016.

Excerpts:

“According to statistics from the Financial Services Commission, Management Companies generated total income amounting to US$ 190 million in 2013 and US$ 206 million in 2014, paid US$49 million and US$ 53 million to their employees in these respective years. They generated total profits of US$ 51 million in each of 2013 and 2014, the last for which we have data, and paid tax to the MRA of US$ 8.9 million and 9.8 million respectively in these two years. Given the scale of their contribution in these various compartments of our economic life, the IMF and Moody’s are drawing attention to the potential setbacks the economy will suffer as a result of the change of the DTAA provisions...”

“We pointed out earlier the want of growth of our traditional goods and other services markets of late. No doubt, the current global economic situation is contributing to the slack. What the situation demands is less of loud and vain talk but more of action to open up newer external demand-driven activities from our economic agents as an intermediate processing centre for exports. We have to associate ourselves with global producers at varying scales of production and the expertise they bring along with them.Here again, we need outside expertise and a planned approach to development, with sustaining strategy behind i...”

Mauritius Times

Rajiv Servansingh - DTAA Protocol: Why It’s Not All Lost Yet

The outcome of the Protocol having failed to gather consensus among the national constituents, there is space and time for government to press on the Indian party not to ratify the document

It would be futile and even irresponsible to continue into a blame game as far as the recent developments concerning the Double Taxation Avoidance Agreement (DTAA) with India are concerned. The fact of the matter is that the protocol has been signed and all those concerned have to come to terms with the fact that a totally new situation has been created. Which does not mean that we have to accept this new situation but simply that there is no way of going back to the ”status quo ante”.

Excerpts:

“A distinction needs to be made between negotiations - the outcome of which lies in the Protocol which has been signed - and ratification. The outcome of the Protocol having failed to gather consensus among the national constituents, there is space and time for government to press on the Indian party not to ratify the document. We should have the modesty to plead that the negotiations were carried out under “abnormal” conditions and the Prime Minister should take the lead in initiating conversations with the highest authority in India - Prime Minister Narendra Modi...”

“The political leaders of India - including Prime Ministers from late Indira Gandhi to Narendra Modi - and of different political parties have always maintained that India would never undertake any action which would in any way hurt the interests of Mauritius. No Mauritian in his right mind would even dare to think that these were merely reassuring statements with no real intent. And yet however much the Indians may protest, it is obvious that they have finally come out of this tussle as the undisputed winners and that the interests of Mauritius in this particular instance could be badly damaged...”

Mauritius Times

Mrinal Roy: Is the private sector’s business model rent driven?

Is the country suffering from the crippling mindset of dependence on profitable rent provided by preferential market access and guaranteed export quotas of yore or the exceptional conditions granted under the 1983 DTAA?

Some operators highly dependent on the rent provided by the Double Taxation Avoidance Agreement (DTAA) as well as the opposition hell-bent on faulting government on everything are up in arms against the revision of DTAA. Painting a picture of gloom and doom, the opposition, the partisan press and those who have been pontificating on DTAA for years wearing different hats are pillorying government and implicitly India’s alleged intransigence, pursuant to the review of DTAA.

Excerpts:

“It must be said that the generous and unique provisions of DTAA granted by India and signed in 1983 have well benefitted Mauritius and operators in the global business industry for 33 years to date. They have allowed Mauritius to develop its financial services industry into a pillar of the economy contributing some 5% to the GDP, a share of which is India related. In essence, DTAA has served both countries well...”

“We should recall that some business savvy and forward-looking operators invested in integrated production units, state of the art equipment and highly automated textile mills in anticipation of the end of the Multi-Fibre Agreement (MFA) on 1 January 2005. Taking advantage of their valuable acquired expertise and experience in their core apparel, knitwear or garments business, they reviewed their marketing strategy, inducted skilled foreign labour and delocalised part of their production to maintain their competitiveness in more difficult market conditions and grow their business. Without the safety net of the MFA, those operators who did not do so could no longer compete with much cheaper exports from China, India, Bangladesh or Vietnam and went under...”

Mauritius Times

Murli Dhar: The Smokescreen of ‘Provisional Charges’

About a year and a half earlier, Mr Rundheersing Bheenick was replaced by Mr Rameshwurlall Basant Roi as Governor of the Bank of Mauritius (BoM) in the aftermath of the change of government. While the handing over was still being discussed at the top level of the BoM, an official statement was made by the BoM to the police to the effect that Mr Bheenick would have taken away with himself “confidential” files from the BoM.

Excerpts:

“It must be said that Mr Bheenick, during his tenure as Governor of the BoM, had not allowed the BoM’s key interest rate to drop the way some in the private sector would have liked, thus forestalling accompanying depreciation of the rupee that was the private sector’s real target. He thought this would amount to discouraging savings and be an unjust tax, in fact, on the public by instigating currency-driven price inflation. In so doing, he displeased the Minister of Finance. He did not also make friends among banks he accused of “fleecing” their customers by imposing successive numerous unjustified bank charges on their transactions or not accommodating, to the expected extent, credit demands from small enterprises...”

“Arguments have been made in favour of the police having recourse to ‘provisional  charges’ if only to help it ground up firmly with time the evidence of criminal wrong-doing it already holds in particular cases. But when charges of the sort are levelled, for reasons unknown, to bring ignominy upon respected citizens of the country who have held high office, the loss of private freedom due to the abusive exercise of the related power of arrest is hardly reckoned with...”

Mauritius Times

Rajesh Simhan: “Mauritius may emerge as a better debt jurisdiction than Netherlands”

Rajesh Simhan (Partner, International Tax, Nishith Desai Associates) believes that debt based investments will still flow to India through Mauritius. He played an active part in a seminar which took place in Port-Louis on 7th April on the implications of the Base Erosion and Profit Shifting (BEPS). The one day seminar was organized jointly by Nishith Desai Associates and Juristconsult Chambers.

L'Express

Kamal Hawabhay: …of Global Business, BEPS, DTAs, Panama Papers etc…

Beware of the campaign of skewed information or misinformation (…out of sheer ignorance or by design?) that is being meted out by so called investigative journalists & certain writers internationally and unfortunately reinforced by our very own local Jacks of All Trades! The target is one of the economic sectors of Mauritius which the IMF itself, on page 61 of its 2015 ARTICLE IV CONSULTATION—PRESS RELEASE (the “Report”) dated March 2016, describes as an “enormous Global Business Companies (GBC) sector”!

L'Express

The good and not-so-good in the Mauritius tax treaty

A little after Prime Minister Narendra Modi visited Mauritius in March 2015, India’s negotiators were at work on redrawing a historic agreement signed over 30 years ago between the two governments. That was the Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion, relating to taxing income and capital gains, which was signed in August 1982, and notified by the Indian government in December 1983, when Indira Gandhi was Prime Minister and Pranab Mukherjee her Finance Minister. The double taxation avoidance agreement, which provides for exemption from capital gains tax in Mauritius, has been at the centre of negotiations between the two countries for close to two decades — with concerns over the abuse of the treaty, and round-tripping of funds of Indians through Mauritius back to their home country in the form of foreign investment.

Mauritius International Financial Centre: This time is different?

Mauritius is at the cornerstone of significant changes domestically and internationally. Since 2 years, the country experienced a change in government, a major financial scandal, uncertainty on the double tax agreement with India, and a slowing down of overall productive activity. As I write this paper, the Honourable Minister of Financial Services is on the forefront explaining the accord which has been signed with India, which will comprise a sharing of taxation on capital gains from 2017 till 2019. India offered as grant around Rs 12.7 Billion to help Mauritius to grow its financial sector and its economy at large.  Much of the political and economic debate is about the future development of Mauritius, which from what I can understand will gravitate around smart cities, the transformational change of the financial sector, the port and the marine economy. Whether these reforms will work or not will depend on the attractiveness (rate of return) of the country and how adaptable Mauritius will be in view of these changes. This paper will underline the main opportunities/difficulties Mauritius will face in developing its financial centre and how important it is to adopt an extremely open strategy towards the core parameters of this sector.

Davin Appanah studied in Paris. He worked as a Quant/Structurer/Trader on Interest Rate and Exotic Derivatives within the investment banking sector for more than 10 years in Paris and some time in New York.  His areas of interests are financial mathematics modelling, interest rate derivatives, quantitative hedge fund strategies, Python and MATLAB, market microstructure and financial microeconomics.

L'Express

India-Mauritius Tax Protocol Marks a Changing Zeitgeist

India has taken full advantage of the current tax zeitgeist. But it will do well to remember that in all developed jurisdictions of the world, greater scrutiny of taxpayers has gone hand in hand with fair, clear and predictable tax systems. The question now is whether India will ensure that there are adequate safeguards in place to meet the expectations of a fair tax regime. If the Indian revenue is perceived as arbitrary or worse, tyrannical by the taxpayers, India might have won the Mauritius battle but would have lost the tax war.

The emergence of lawfare

The security of individual nations and the wider world is protected through many means, force or diplomacy, culture or environment. Law is increasingly deployed as an alternative to military force, although its use dates back as far as international law itself. Even private sector and other non-governmental attorneys play a leading role in lawfare.

• Analyzes the benefits and practices of "lawfare"-a security maneuver countries can use instead of armed force in international disputes
• Examines how private attorneys can come to play a large role in these international maneuvers
• Illustrates the concept with real-world examples of lawfare use by the US, China, Iran, Israel, Palestine, and others

Rama Sithanen: ‘We are in deep trouble. We are in a hole... ... and Bhadain keeps digging with conceited fury and arrogant zeal’

Following the signing of the revised Mauritius-India Double Tax Avoidance Agreement (DTAA) the mood among economic and financial players is definitely gloomy. The consequences for Mauritius as regards investment and our economic future are likely to be severe and impact several sectors negatively. Our guest is economist and former Minister of Finance Rama Sithanen, who gives our readers a no-holds barred view of the negotiations and the expected fallouts, in a semi-technical language that will make it accessible to the understanding of our readers.

Mauritius Times

Managing the Global Business Sector post 10/5

We will have to give something more to get over the substance of the DTAA which now has shifted away to India

-- Anil Gujadhur

Many have been shocked by the news about the amendment effected on 10th May to the India-Mauritius Double Tax Avoidance Agreement (DTAA). The advantages Mauritius was deriving as a global business centre looked suddenly withdrawn. We conceded at one stroke all that India has been insisting upon for long.

Mauritius Times

A Gradual but Continuing Hit against the economy

This week saw the signing off of a significant amendment to our Double Tax Avoidance Agreement with India dating back to 1983. Mauritius’ Global Business sector is still reeling from the unexpected concession made by us in this regard. The ‘coup’ is programmed to start hurting the sector immediately by changing international investors’ perception of Mauritius at first. The final blow is programmed to be delivered as from 1st April 2017. Thereafter, it is India which takes over the right the DTAA conferred on us to charge capital gains tax on investments made by companies resident in Mauritius investing in India.

Mauritius Times

The Mauritius Loophole: The Story Of Its Origin And How India Finally Managed To Shut It

Between 2001 and 2011 nearly 40% of all FDI that came to India came from Mauritius - thanks to a loophole that exempted such investments from capital gains tax.

India and Mauritius have recently agreed to amend a 1982 treaty between the two countries that would effectively seal this loophole.

Here is the story of how (and why) the loophole came into existence.

EPW: Mauritius No Longer India's Treasure Island

Was the decision to amend the treaty with Mauritius an answer to the growing criticism within the country and outside to plug loopholes that blatantly facilitated conversion of black money into white by moving funds quickly through different no-tax jurisdictions, a phenomenon sometimes described as “treaty shopping”? Senior officials in the Ministry of Finance have acknowledged that the old treaty with Mauritius had become untenable in view of the government’s intention to implement a general anti-avoidance rule or GAAR aimed at curbing tax avoidance with effect from April 2017.

EPW: Revisiting Capital Gains Tax on Securities in India

India has one of lowest tax-gross domestic product ratios in the world. There is a need to utilise every tax instrument, including the capital gains tax on securities, to broaden the tax base. Comparing tax-GDP ratio and capital gains tax on securities across G-20 countries, the paper argues for eliminating the distinction of long-term and short-term capital gains classification and move towards progressive taxation of both. Estimates for revenue potential of the desired capital gains tax regime further substantiate the argument. Revenue loss estimates, on account of Double Tax Avoidance Agreement with respect to capital gains, with low tax jurisdictions like Mauritius and Singapore, are provided to give a comprehensive view with respect to capital gains tax policy in India.

Bank of Mauritius: Double Tax Avoidance Agreement between Mauritius and India

Following concerns expressed in the media and in certain quarters regarding the likely impact of the revision of the DTAA between Mauritius and India, the Bank wishes to highlight some recent trends in the evolution of the robustness of the domestic banking system for the benefit of the public

India: Grandfathering provision may lead to FDI surge from Mauritius

The government expects a one-time surge in foreign direct investment (FDI) and portfolio inflows to take advantage of the few months that the India-Mauritius treaty will remain in its current form before recently announced changes take effect. 

The biggest share of this could be venture capital going into startups, analysts said.

India-Mauritius tax protocol: Investors taxed over grey zone in pact

There's a grey zone in the new rules of the game between India and Mauritius. 

Many offshore institutional investors, private equity houses and portfolio managers - which used vehicles in Mauritius to buy convertible instruments of Indian companies - are unclear whether they would be taxed if the conversion of these securities happens on or after 1 April 2017.

Mauritius - DTAA with India: The death sentence signed?

Was it a death sentence that was signed on Tuesday? After years of tenacious negotiations between Mauritius and India, the latter finally won the match against Mauritius this week in the long battle to revisit the sensitive Double Taxation Avoidance Agreement (DTAA) that has been unarguably the backbone of a flourishing sector which has had a crucial weight in the whole financial services industry of Mauritius up to now.

Protocol amending the Convention between the Government of Mauritius and the Government of the Republic Of India for the Avoidance Of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains, and for the Encouragement of Mutual Trade and Investment

This Protocol amending the Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains between India and Mauritius was signed by both countries on 10 May 2016 at Port Louis, Mauritius.

India: After Mauritius tax treaty, government looking to rework pact with Singapore

After successfully amending the 33-year-old India-Mauritius tax treaty to prevent loss of revenue and round-tripping, New Delhi is now looking to start talks with Singapore to tweak the double taxation avoidance agreement (DTAA) with the nation to plug any similar leakages. 

Moody's: Banks - Mauritius: Resilient Economy, Strong Capital Provides Support but Offshore Sector Holds Liquidity and Asset Quality Risks

While Mauritian banks are supported by their strong capital buffers and the country's resilient economy, they face risks stemming from their large offshore exposure and asset quality pressures, Moody's Investors Service said in a report published today.

Mauritius has stable operating conditions, with real GDP expected to grow by 3.5% in 2016, supported by public investment and low oil prices. Moody's expects credit growth of 6%-7% will support banks' profitability which will remain broadly flat in 2016, and the banks' sound capital ratios.

''We expect the sector's Tier 1 capital ratio to remain strong, at around 16% by end-2016, supported by moderate growth in risk-weighted assets and relatively low dividend pay-outs'', said Elena Panayiotou, Assistant Vice President -- Analyst and co-author of the report.

Mauritius's offshore sector, however, is a source of vulnerability for the economy and the banks. The offshore sector, which according to the International Monetary Fund holds assets worth more than $630 billion, is vulnerable to any revision of the Double Tax Avoidance Agreement Treaties, an intensification of efforts to counter tax avoidance or a significant increase in the country's tax rates.

"Any disruption to the offshore sector would expose the Mauritian economy and banking sector to contagion risks," adds Constantinos Kypreos, a Vice-President and Senior Credit Officer. For banks, offshore deposits account for a significant proportion of the total liabilities (in excess of 40%), hence any significant withdrawals would affect their funding bases, leading to deleveraging pressures.

Another source of vulnerability for the Indian Ocean island's banks are the high concentrations of loans to local conglomerates. Problems at one company can affect the whole conglomerate, which is typically exposed to numerous banks.

Problem loans comprised 7% of gross loans as of September 2015. Moody's expects credit risks to remain high due to sizeable borrower concentrations, heavy exposure to the troubled construction sector and offshore lending estimated at 53% of total loans, primarily in India and Africa.

Africa’s growth: meltdown or slowdown?

Economic growth across the region is likely to remain slower in coming years than it has been over the past 10 to 15 years. The International Monetary Fund’s (IMF) projection for 2016 is now down to 3%, from what was a forecasted 6.1% in April 2015.

The main reasons for a relative slowdown are not unique to Africa and are the same as those weighing down the global economy: a general slowdown in emerging market economies, and in particular the rebalancing of China’s economy; ongoing stagnation in most developed economies; lower commodity prices; and higher borrowing costs.

However, although growth in region has relatively slowed, two-thirds of Sub-Saharan African economies are still growing at rates above the global average, and will remain the second fastest-growing region in the world for the foreseeable future, after Emerging Asia. This is further supported by the year-on-year increase in FDI project numbers in Africa in 2015 that occurred in a context in which the total number of FDI projects globally dropped by 5%. In fact, Africa was one of only two regions in the world in which there was growth in the number of FDI projects over the past year.

Sugan Palanee, Africa Markets Leader at EY says, “From an investment perspective, the next few years may be challenging – this is not because the opportunities are no longer there, but rather because these opportunities are likely to be more uneven than they have been. It is now more important than ever for organizations and investors, who sometimes place to great an emphasis on shorter term economic growth trends, to adopt a granular, fact-based approach to assessing investment and business opportunities for the long-term.”

Measuring potential and progress: the Africa Attractiveness Index

To support investors in adapting to a more uncertain environment and to assess variable opportunities and risks across the continent, the EY Africa Attractiveness Index (AAI) tool provides a balanced set of shorter and longer term-focused metrics. The index helps to measure both likely resilience in the face of current macroeconomic pressures, as well as progress being made in critical areas of longer-term development, namely governance, diversification, infrastructure, business enablement and human development.

Michael Lalor, EY’s Lead Partner Africa Business Center, comments, “It is important to recognize that this kind of indexed ranking does not provide a definitive assessment of any of these markets; there are obviously no absolute answers in searching for market potential. However, the Africa Attractiveness Index does provide a useful starting point for analysis and helps enable a strategic dialogue on growth priorities, risk appetite and investment criteria.”

EY Africa Attractiveness Index country ranking

The index illustrates that:

• Despite macroeconomic challenges (and a low-growth environment): South Africa still outperforms most other African economies due to relatively high scores across every other dimension (partly a reflection of the fact that the South African economy is more developed than any other African economy).
• Kenya and Cote d’Ivoire benefit from strong economic growth performance and prospects, with both performing moderately well in terms of infrastructure and business enablement.
• Botswana, Mauritius and Rwanda, although small markets, have all got a strong track record in areas of business enablement, social development and economic management, and so perform relatively well.
• The North African countries of Egypt, Morocco, Tunisia, as well as Ghana, in West Africa, remain under some pressure economically, but have the advantage of a relatively business-friendly environment, good infrastructure and, in the case of Ghana, a strong governance track record.
• Nigeria’s relative ”underperformance” on the AAI (ranked at number fifteen overall) is perhaps somewhat surprising; while the Nigerian economy ranks as one of the most resilient in Africa, lower scores on the business enablement, governance and human development pillars are reflected in the overall ranking.
• Similarly, other high-growth economies like Tanzania, Uganda and Ethiopia are all ranked in the top 10 in terms of macroeconomic resilience (with Ethiopia at number one, but are also relative underperformers on other longer-term focused dimensions.

The index clearly indicates that there will be different answers for different organizations and investors with different priorities; and as priorities change over time, so will the answers.

Lalor concludes, “Given the scale, complexity and fragmented nature of the African continent, making well-informed choices about which markets to enter when and via which mode will be more critical than ever. A country’s macroeconomic resilience is also only one of several factors that investors and organizations needs to consider when conducting this kind of analysis. We are at an inflection point in terms of the structural evolution of most African economies; decisions made and actions taken now will determine, which of these economies consolidate the gains made over the past decade as a platform for sustainable growth in coming decades, and which of them begin to slide backward.”

EY’s attractiveness program Africa 2016 - Navigating Africa’s current uncertainties

EY’s attractiveness program Africa 2016 - Staying the course

India Changes Investment Treaty With Mauritius: Foreign Investment In India To Fall

India has negotiated a change in the investment treaty the country has with Mauritius. The net effect of this will be that foreign investment into India will fall and in the future the wages of the average Indian worker will be lower than they would have been without this change. This is not what we might call good public policy: but that’s the way governments tend to think about these things. Far more important that they get their slice of tax money than that the economy in general be encouraged to grow. It’s important to note that this analysis is not as the result of some strange neoliberal or right wing theory. This is the absolutely standard view about the taxation of capital investment. The more it’s taxed, and especially the more foreign capital is taxed, then the greater the effect on domestic wages.

Forbes

Who gains, who loses in new tax pact with Mauritius? Will FIIs run away?

The Press Note states that the protocol amends the prevailing residence based tax regime under the India-Mauritius DTAA and gives India a source based right to tax capital gains which arise from alienation of shares of an Indian resident company acquired by a Mauritian tax resident.

However, the protocol provides for grandfathering of investments and the revised position shall only be applicable to investments made on or after April 1, 2017. In other words, all existing investments up to March 31, 2017 have been grandfathered and exits/shares transfers beyond this date will not be subject to capital gains tax in India.

Additionally, the protocol introduces a limitation of benefits provision which shall be a prerequisite for a reduced rate of tax (50% of domestic tax rate) on capital gains arising during a two year transitionary period from April 01, 2017 to March 31, 2019. Further, the article on exchange of information has also been updated to match the prevailing international standards.

The Economic Times

Mauritius Hosts the 23rd International Council for Commercial Arbitration Congress

Arbitration is one of the peaceful means to resolve many disputes at the negotiating table and the United Nations has contributed significantly to the development of international arbitration, said the Secretary-General of the United Nations, Mr Ban Ki-Moon, yesterday in his keynote address at the 23rd International Council for Commercial Arbitration (ICCA) Congress. Mr Ban Ki-Moon is on a three-day official visit to Mauritius.

The Congress is being held from 8 to 11 May 2016 at the Swami Vivekananda International Convention Centre in Pailles. In his address, he recalled that Mauritius was chosen as the host for the ICCA Congress because of the progress that Mauritius has made to improve its legal system for international arbitration and to position itself as a centre of excellence for international arbitration in Africa.

This progress includes the adoption of the International Arbitration Act 2008 (IAA), an advanced law based on the UNCITRAL Model Law, with further refinements to make the Mauritian legal system for international arbitration as supportive and attractive as possible. Mauritius has also put in place institutions and systems which support international arbitration, he said.

According to the Secretary-General, arbitration contributes to economic development, protects human rights and deepens partnerships of business community. It also helps the world to overcome hatred and upholds dignity, he added. According to him, a robust legal system ensuring the rule of law is often seen as a necessity both for economic development and the protection of human rights.

For his part, the Prime Minister, Sir Anerood Jugnauth, pointed out that international arbitration is now the global dispute resolution mechanism. Mauritius has taken the lead in our region in this field, and has shown consistent determination and flexibility in improving our system to cater for international arbitration matters. This reflects our understanding of the importance of international arbitration. The effort made by Mauritius in the field of international arbitration is also part of a broder approach which underlies the development of our economy in recent decades, he said.

Speaking about the rule of law, the Prime Minister said that Mauritius has always been a country in which the respect for the rule of law has been deeply anchored in the Constitution as well as in the society. Our courts are fiercely independent, he said, and enjoy protections such as genuine and effective security of tenure, which allow them to do their work entirely free from outside influence.

Sir Anerood Jugnauth stressed that Africa has been an important participant in international arbitration proceedings in recent years and in this context, Mauritius is positioning itself to become a centre of excellence for international arbitration.  

ICCA 2016 Mauritius: The first African ICCA Congress

Delegates from Europe, Africa, the Americas, Asia and Australia are focusing on the subject of international arbitration and the rule of law. The Congress is serving as a platform to enable delegates to be up to date with the latest developments in the subject and to be involved in the discussions that will shape developments in the field in years to come.

The ICCA Congress is the largest regular conference devoted to international arbitration. It takes place every two years, on each occasion in a different city. The host city for the Congress is selected by ICCA on the grounds that it is a place which has made significant recent advancements as a venue and centre for international arbitration. The 2012 Congress, held in Singapore, and the 2014 Congress, held in Miami, each attracted over 1,000 delegates.

The Congress is a major academic and professional event, representing a significant milestone in the advancement of international arbitration law and practice. It includes presentations of papers from the leading experts in the field of international arbitration, as well as substantial opportunities for discussion and sharing of ideas.

Jersey Financial Services Commission (JFSC) action taken re Mossack Fonseca

Since the initial publication of the Panama Papers, the Jersey Financial Services Commission (JFSC) has been closely monitoring developments and any relevant connections between Jersey financial services practitioners and the Panamanian firm Mossack Fonseca or any other subject material that has so far emerged into the public domain from the Panama Papers publication.

The JFSC, as quoted in the media has relied primarily on self-disclosure by licensed and regulated financial firms in Jersey as there has been a high level of awareness amongst the regulated community of their obligations in this respect under both local anti-money laundering legislation and the relevant Codes of Practice issued by the JFSC. The Codes set requirements for conduct of business in the jurisdiction with a clear expectation for open and transparent reporting to the JFSC of significant matters.

This process has yielded a relatively small number of such relevant connections to date, all of which are being scrutinized carefully. Some are very historic and none to date suggest significant evidence of misconduct or failure to identify correctly persons for whom Jersey financial practitioners are acting, or other important anti-money laundering information such as source of wealth and purpose of business being conducted.

The level of attention globally generated by the Panama Papers matter, linked to further anticipated public disclosures covering worldwide financial dealings over the coming days, suggest that the authorities in Jersey should be as well prepared as possible to offer further detailed comment on any arising matter for this jurisdiction. Accordingly, the JFSC has now set out a more structured request for information from financial services firms regulated by the JFSC in order to be as fully sighted as possible on material connections to Jersey which may require further follow up, scrutiny or possibly in what it would anticipate to be rare cases a level of formal investigation.

This request should not be read as an indication that we expect Jersey to be any more linked to the developing Panama Papers situation than has until now been the case with the few connections made to date. Nonetheless, the JFSC is of the view that a comprehensive and clear understanding of all such connections to Jersey would be timely and relevant in the current situation, above all to be assured that the conduct of Jersey financial practitioners is as expected and that any such connections are set in a relevant context given current high levels of global media attention.

John Harris, Director General, commented:

“We realise that in a fast moving and demanding situation such as this, flexibility is required and two of the JFSC's key objectives, are aiming to protect the reputation of Jersey in commercial and financial matters and in so doing pursuing the Island's best economic interests. These aims will always guide our actions and we are monitoring the developing events very carefully and will take any appropriate action needed.”