FSC Mauritius: Revocation of the Management Licence held by Belvedere Fiduciary Ltd

The Enforcement Committee (the “EC”) of the Financial Services Commission (the “FSC”) has, on 21 December 2016, revoked the Management Licence held by Belvedere Fiduciary Ltd (“BFL”) pursuant to sections 7(1) (c) (vi) and 52(3) of the Financial Services Act 2007 (the “FSA”)

Public Notice

Offshore Pilot Quarterly (December 2016, Volume 19 Number 4)

Exceptional Behaviour

I read recently that politics in the United of America have become “infested with Latin-American-Style populists”. As readers of my Latin Letter column in the Offshore Investment magazine will know, I have made several observations, including in this month’s column, about the declining number of populist governments on the subcontinent whilst the opposite is true in other parts of the world. It is yet another example of the abnormal replacing the norm, as it has done in economies. (I detest “the new normal” phrase, having thought the obsequious “reach out” was bad enough.)

Imagine, if you will, what Donald Trump’s reaction in the US would have been if the presidential election result had mirrored Peru’s results in June, when Pedro Pablo Kuczynski defeated Keiko Fujimori by a win of 50.1 per cent? Would he have echoed Fujimori’s words: “In a democratic spirit, we accept these results”? In America a contingent lawsuit, subsequently rejected, was already in the pipeline if the results in Nevada (more about that state to come) had contributed to a possible Trump election defeat. Would pre-election claims of rigging have been replaced by riots and revolt? A few years ago, had the Peruvian result sparked chaos, one would have met it with a shrug of the shoulders and a resigned, facial expression, as if to say, “well, this is Latin America after all”. How things can change.

But today in the West we have entered the epoch of the estranged: those who are disaffected and distrustful of their governments. As European history tells us, it is a formula for the rise of populism with all its unknown consequences. We have also entered an age where governments wish to strip naked privacy; this, too, will have unintended consequences. The belief in the sanctity of one’s personal banking information has been disabused to the extent that bankers have become weapons of mass obstruction when attempting to open an account in an offshore jurisdiction. Not so in the country where, in 2013, Devin Nunes, as chairman of a Congressional working group on tax, urged reforms so that it could be turned into “the largest tax haven in US history”. That country is the US and my fellow speaker, Richard Hay, at September’s Oxford symposium, as he had in a Financial Times article, spoke of “another example of how the US has elevated exceptionalism to a constitutional principle” following the Tax Justice Network’s claim that the US is one of the world’s top three “secrecy jurisdictions” (the others being Switzerland and Hong Kong). And it doesn’t matter what efforts are made by the US president in Washington to weaken opacity because material changes require Congressional approval, frequently stymied by business lobbyists and various state representatives (remember that the incorporation of companies – the starting point for transparency – is a state matter and not a federal one). The workings of Congress were inspirational for Mark Twain: “Suppose you were an idiot, and suppose you were member of Congress, but I repeat myself”. 

In the late 1930s the US Treasury secretary, Henry Morgenthau, informed his president that some wealthy American tax evaders were, as he described it, setting up dummy corporations with dummy directors in British colonies and he said that “Legalised avoidance or evasion by the so-called leaders of the business community… throws an additional burden upon other members of the community…” So America has been very aware of the issue for well over 75 years. 

No Need to Try Harder in Nevada 

But a wink is as good as a nod to a blind man and so just last month I was sent an email attachment with a very picturesque scene of rural Nevada by a trust company operating there, inviting me to white-label some of my services, especially my trustee business, under the Nevada state flag. It amounts to concealment of the reality; because it is a case of the service which is produced in Panama being rebranded in Nevada. Suddenly the stain of the term “offshore” disappears at a wave of the white label wand. Now, of course, concealment can have legitimate or nefarious motives; as the International Consortium of Investigative Journalists has stressed, concerning the Panama Papers, persons who have engaged the Mossack Fonseca law firm for legitimate, legal uses are named and who have not, therefore, broken the law. In this time of transparency, “concealment” has become a very delicate word to use – whether it’s a whitewash versus white label situation. I have absolutely no doubt that both the offer made by my counterpart in Nevada and its motive, are genuine and above board. So why would this trust company in Nevada feel that a Panamanian trust company would want to operate behind this façade? A clue lies in the phrase “privacy environment” which was used in the promotion materials sent to me. 

“Privacy environment” is a softer term to use today; it certainly beats “concealment”, and in that context, let’s compare Panama to Nevada. In October the Panamanian government signed the Organisation for Economic Cooperation and Development’s Convention on Mutual Administrative Assistance in Tax Matters which establishes a legal framework for the implementation of financial transparency and international cooperation initiatives. The OECD considers Panama a big fish to catch in its net; in the local and regional press coverage of the event at that time (almost) outshone the Trump and Clinton election road show.

Angel Gurría, the OECD’s Secretary-General, was exuberant and declared that Panama had now moved much closer to meeting “the global tax transparency standards”. This is not the same, however, as Panama adopting a no-strings-attached policy of automatic exchange of nonresident financial account information with a person’s tax authorities. No. In Panama’s case, as in some others, it will enter into country-by-country (bilateral) agreements and Panama’s ambassador in France, who co-signed the Convention together with Mr. Gurría, observed that it allows for both assistance in some matters only, and flexibility in others, adding that this “will be determined by Panama”. One must accept, however, in all this that the OECD’s initiative goes some way towards appeasing the angst of those who feel marginalised by a society that is more unequal than ever; as John Kenneth Galbraith observed, “The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself”.

The OECD Convention document signed by Panama is at the heart of the Common Reporting Standard, developed by the OECD. The standard, however, despite Mr. Gurría’s remark about global standards for tax transparency, is not global, simply because the US has declined to be committed to it. So no wonder trust companies in America see opportunities abroad, and which brings me back to Nevada. Neither trust companies nor corporate service providers anywhere in the US are as thoroughly regulated as they are offshore in responsible jurisdictions, and so a Nevada trust company naturally sees itself as very real competition, particularly for offshore centres either nestled in the Caribbean or operating in Panama that are really just not that far away. And, of course, the US is on the Financial Action Task Force’s white list; there’s the plus.

The Ignited States of America

The US presidential election showed us, at a basic level, just how information stored electronically can be compromised by following the Hillary Clinton email scandal which blew up in her face in October. Professor Jason Sharman at the Centre for Governance and Public Policy at Griffith University in Brisbane, Australia, could not be more passionate about tax transparency, but even he has his doubts, and I quote: “What right to financial privacy do citizens of democracies have? Should we protect citizens from undemocratic nations? What is legitimately private? For example, the state knows how much I earn, but strangers do not. Where you have states that are not bound by the rule of law, that are corrupt and commit human-rights abuses, do you want to help oppressive governments get more information about their own citizens in a way that might help those governments further oppress them? I’m not sure that’s really been thought through enough”. That understatement has few rivals in 2016 and is a rare example of he and I being in agreement over offshore matters.

No wonder Panama, as it has persistently done, told the OECD that it will not provide tax information to just any country that knocks on the door. There must first be an agreement in place with the enquiring country. Panama has joined more than a hundred other co-signatories to the OECD Convention and that will require an equal number of separate agreements because, like Professor Sharman, Panama knows that not all countries are democratic (even if they are, democracy is having a tough time in a few of them – democracy’s vanguard, to me, is now the Ignited States of America).

H. L. Mencken (1880-1956), an American commentator and journalist, was a grand exposer of trumpery (any similarity to living persons is purely coincidental – it has been in usage for centuries) in all its forms, insisting that Americans did not speak English, they spoke American. In 1919 he published “The American Language” which was a monumental study in the field of philology. How America distinguishes itself from the rest of the world – not just by language – raises Mr. Gurría’s comment about “global tax transparency standards”, with a nod to my colleague Richard Hay, because it is neither standard nor global if the West’s leading power is excluded. This is important to those in the West who live outside America’s orbit because, for better or for worse, still today, all roads, which once led to Rome, lead to Washington, whether or not the barbarians are gathering at its gates.

One commentator has described Donald Trump’s win as giving him a mandate to blow up Washington, especially with the Senate and Congress enjoying Republican majorities. This upheaval of the establishment is not dissimilar to the civil rights protests of the 1960s, echoed at the time by Bob Dylan’s protest songs. He has earned his Nobel prize and those particular words he wrote in 1964 surely have resonance again today: “There’s a battle outside ragin’/ It’ll soon shake your windows / And rattle your walls / For the times they are a –changin’. It was the time of the sceptic and the distressed, as it is today, and similar maladies haunt his melodies to those words.

Frankly, blowing up Washington (metaphorically speaking, before I’m placed on a terrorism list somewhere) doesn’t mean one jot to me. I’m not an American, and neither do I live there. What does, however, bother me are all those roads that lead to Washington, and the global reach of America’s influence; what is not needed is the blowing up of the world order – certainly not in the West – which would destabilise the existing fragile political and economic framework, despite its imperfections.

A Hard Rain’s A-Gonna Fall

Cicero said that if we do not learn from history we remain children. History, both modern and ancient, has taught us the importance of understanding the different cultures which make up mankind; but learning and applying are always, of course, very different things. Still, there is an obligation to fuse both together if you wish to be a country that boasts being the leader of the free world; I repeat: it’s not an opinion, its an obligation. One does not need to study anthropology in depth, but one should perhaps accept President (soon to be former) Obama’s viewpoint: “I believe in American exceptionalism. Just as I suspect that the Brits believe in British exceptionalism, and the Greeks believe in Greek exceptionalism”. I made this very point in the September Offshore Pilot Quarterly about the national pride which Latin Americans have. It is no coincidence that he is a US president who has experienced living in a foreign country.

I would suggest to every future US president – and particularly the members of the foreign policy team – that readings from the late American anthropologist, Ruth Benedict, should be mandatory (“Patterns of Culture” would be a good place to start). She had a profound influence on cultural anthropology, insisting that “The purpose of anthropology is to make the world safe for human differences”. T.E. Lawrence, last century’s Lawrence of Arabia, and who, incidentally, also appreciated (vital today) the different cultures in the Middle East, once said: “All men dream: but not equally. Those who dream by night in the dusty recesses of their minds, wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make them possible.” So, yes, those dreaming of making America great again need to be sure not to repeat past mistakes and create international animosity that will make America only grate again.

When admiring scenic views of Nevada, one should consider carefully the comparative safety on offer from trust companies in a country with not just more guns, but lawsuits (even against an incoming president), for which trustees serve as magnets. When absorbing the arguments against international investments under the stewardship of offshore financial services centres versus the perceived safety onshore, the largest being the US – but Europe should not be left out - just reflect on what you see and (for those of my generation) also what you read in books and journals, to aid deep and measured analysis. The caretakers of assets in foreign parts, usually those labelled “offshore”, still today have the ability to offer preservation and protection in uncertain times.

A tune in 1967, inspired by Bob Dylan, includes the lines: “Starting from today I’m going to be a cynic / It’s not just a phase and it’s not just a gimic”. When I wrote it, I did not realise that I was displaying the first signs of becoming a curmudgeon, a person who is, as defined in the dictionary, someone who dislikes hypocrisy and pretence and has the temerity to say so, but in an engaging and humorous manner. The master was H. L. Mencken, and although I can’t even stand in his shadow, with Menckenian certainty I can declare, nearly 50 years later, that I remain a cynic; it wasn’t a phase then, in the turbulent 1960s, any more than it is today in the tumultuous 21st century. As Bob Dylan put it, I fear that “A Hard Rain’s A-Gonna Fall”.

Offshore Pilot Quarterly (independent writing for independent thinkers) has been published since 1997 by Trust Services, S. A. and is written by Derek Sambrook

Mauritius President: role of rural women is key in climate change-threatened island states

The President of Mauritius, Ameena Gurib-Fakim, today met FAO Director-General José Graziano da Silva in talks that focused on the crucial role played by rural women in Small Island Developing States (SIDS), which are particularly vulnerable to the impacts of climate change.

Citing her own country as an example, President Gurib-Fakim said climate change is increasingly putting food security and nutrition at risk and women represent the “key means to improve and secure livelihoods.”

The President met Graziano da Silva at the sidelines of a high-level event on rural women co-organized by FAO, the European Commission and the Slovak Presidency of the Council of the European Union in collaboration with the International Fund for Agricultural Development (IFAD), the World Food Programme (WFP) and UN Women.

At the event, Graziano da Silva noted that achieving gender equality and empowering women is not only the right thing to do but is a critical ingredient in the fight against extreme poverty, hunger and malnutrition.

Women, the backbone of work in agriculture

About 80 percent of the food consumed in developing countries comes from family farming, a crucial sector in which almost 45 percent of the labor force is formed by women. The figure rises to 60 percent in parts of Africa and Asia.

Noting how droughts, floods, and other extreme climate events related to El Niño and La Niña have particularly hit SIDS countries, President Gurib-Fakim said that the knowledge and experience gathered by FAO through the years is needed to assist  rural communities, especially women, to address the challenges.

FAO’s expertise in  water harvesting systems and technologies to improve seeds and farming systems, is particularly valuable she said. The President and FAO’s Director-General also discussed the importance of technologies to give women access to information through mobile phones.

Achieving resilient food systems

Graziano da Silva noted how FAO supports SIDS countries to achieve food systems that can cope with shocks and can adapt in the face of new and emerging challenges. This includes those related to nutrition security, social protection, sustainable natural resource management, disaster risk management, resilience, climate change and agricultural trade and investment.

With FAO’s support and following the SIDS Accelerated Modalities of Action Samoa Pathway - an action plan to address food and security challenges facing the SIDS- countries are developing a Global Action Plan for Food Security and Nutrition.  

In this context, Graziano da Silva praised President Gurib-Fakim’s efforts in championing research, science and innovation in Africa with a focus on women. 

Watch President Ameena Gurib-Fakim's remarks:

President speech on the occasion of the High-level Event “Step It Up Together with Rural Women to end Hunger and Poverty” organized by the Food and Agriculture Organization of the United Nations (FAO)

The Mauritius IFC: Driving Growth in Africa

As a jurisdiction of substance, the Mauritius International Financial Centre (Mauritius IFC) has been instrumental in driving quality investments in Africa, leading to sustained growth and prosperity across the continent.

It is therefore with deep regret that we take note of the misperceptions and misconceptions about the Mauritius IFC reported in the Oxfam policy paper on “Tax Battles” published on the 12th of December 2016.

It is unfounded to claim that Mauritius is a tax haven when the country has:

1. adopted all of the internationally acclaimed standards in tax matters;
2. enabled quality foreign investments in Africa leading to inclusive economic development;
3. always practiced a policy of transparency and exchange of information;
4. always prone a model for its jurisdiction based on substance;
5. adopted a friendly, homogenised and flat system of taxation; and
6. a real multi sectoral economic model.

Mauritius, as a fully collaborative and responsible international financial centre, has taken significant steps to adhere to international best practices as set by leading globally recognised institutions.

To enhance its transparency and collaboration framework, in June 2015, Mauritius signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, developed by the Organization for Economic Cooperation and Development (OECD). Mauritius is equally a member of the Early Adopters Group committed to the early implementation of the Common Reporting Standard (CRS) on the automatic exchange of financial account information, developed by the OECD.

Mauritius is also the first African country to have signed up to the Intergovernmental Agreement with the United States for the implementation of the Foreign Accounts Tax Compliance Act (FATCA).

Mauritius has actively participated in the Ad-Hoc Group set up by the OECD to work on the drafting of the Multilateral Instrument under Action 15 of the Base Erosion and Profit Shifting (BEPS). More recently, Mauritius has equally joined the Inclusive Framework to implement the BEPS Recommendations and the new initiative on exchange of Beneficial Ownership information. Mauritius is committed to implement minimum standards in the BEPS package, as well as, other BEPS recommendations.

Mauritius also remains an active member of the Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG), the purpose of which is to combat money laundering in Eastern and Southern Africa by implementing the FATF recommendations. As such, Mauritius has always been at the forefront in the fight against international tax evasion and other malpractices.

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Mauritius as a “Largely Compliant” jurisdiction – a rating which equals that obtained by developed economies such as the USA, the UK and Germany. This bears testimony to the good standing of our jurisdiction in so far as transparency and exchange of information is concerned. The Mauritius IFC also has the required exchange of information mechanisms in place through its bilateral treaties and Tax Information and Exchange Agreements (TIEAs) that it has signed.

The fiscal regime of Mauritius is underpinned by a transparent system which provides for a level playing field and a competitive tax bracket for businesses and individuals at a single rate of 15%. This regime has successfully generated substantive economic activities across all sectors of the Mauritian economy.

Furthermore, the Mauritius IFC continues to address the growing needs of development of the African continent by significantly contributing to the increase in prosperity in Africa, along with job creation and poverty alleviation.

It is noteworthy that some of the most active social impact investors, investment funds as well as philanthropic foundations have chosen Mauritius as their financial centre as the country boasts a friendly and conducive environment to do business. Mauritius tops a number of rankings in Africa by international institutions including the African Index on Economic Transformation; the Mo Ibrahim Index of African Governance; the World Economic Forum Global Competitiveness Report and the Fraser Institute on Economic Freedom of the World Ranking, amongst others. Mauritius does not only enable impactful projects across the continent, but is equally a recipient of significant amount of these investments in its economic sectors.

Investors are equally attracted by the political and economic stability of the country, the risk mitigating avenues that it offers, its sound legal and regulatory framework, its pool of professionals as well as state-of-the-art infrastructure.

The Financial Services Commission (FSC), the integrated regulator for the Non-Bank Financial Services sector, and the Financial Services Promotion Agency (FSPA), the national agency responsible for developing and promoting Mauritius as an International Financial centre, therefore firmly maintain, in light of the above-mentioned facts, that Mauritius is not a tax haven.

As an African country, Mauritius has and continues to be a strategic development partner, in and for, the continent.

Ronny Lam: «The acquisition of IFS is a strong vote of confidence for the offshore sector»

Ronny Lam explains how the coming of SANNE within the local landscape should help raise the ante and encourage existing operators to get out of their comfort zone and innovate.

L'Express

World’s worst corporate tax havens exposed - Oxfam report reveals dangerous race to the bottom on corporate tax

Bermuda, the Netherlands, Ireland and Luxembourg are among the world’s 15 worst corporate tax havens, according to new Oxfam research published today. The report ‘Tax Battles,’ reveals how these tax havens are leading a global race to the bottom on corporate tax that is starving countries out of billions of dollars needed to tackle poverty and inequality.

The full list of the world’s worst tax havens, in order of significance are: (1) Bermuda (2) the Cayman Islands (3) the Netherlands (4) Switzerland (5) Singapore (6) Ireland (7) Luxembourg (8) Curaçao (9) Hong Kong (10) Cyprus (11) Bahamas (12) Jersey (13) Barbados, (14) Mauritius and (15) the British Virgin Islands.  The UK does not feature on the list, but four territories that the United Kingdom is ultimately responsible for do appear: the Cayman Islands, Jersey, Bermuda and the British Virgin Islands.

Oxfam researchers compiled the ‘world’s worst’ list by assessing the extent to which countries employ the most damaging tax policies, such as zero corporate tax rates, the provision of unfair and unproductive tax incentives, and a lack of cooperation with international processes against tax avoidance (including measures to increase financial transparency).

Many of the countries on the ‘world’s worst’ list have been implicated in tax scandals. For example Ireland hit the headlines over a tax deal with Apple that enabled the global tech giant to pay a 0.005 percent corporate tax rate in the country. And the British Virgin Islands is home to more than half of the 200,000 offshore companies set up by Mossack Fonseca - the law firm at the heart of the Panama Papers scandal.

Esme Berkhout, tax policy advisor for Oxfam said: “Corporate tax havens are helping big business cheat countries out of billions of dollars every year. They are propping up a dangerously unequal economic system that is leaving millions of people with few opportunities for a better life.”

Tax dodging by multinational corporations costs poor countries at least $100 billion every year. This is enough money to provide an education for the 124 million children who aren’t in school and fund healthcare interventions that could prevent the deaths of at least six million children every year.

Yet Oxfam’s report shows that tax havens are only part of the problem. Countries across the world are slashing corporate tax bills as they compete for investment.  The average corporate tax rate across G20 countries was 40 percent 25 years ago – today it is less than 30 percent. The use of unproductive and wasteful tax incentives is also ballooning – particularly in the developing world. For example, tax incentives cost Kenya $1.1 billion a year – almost double their entire national health budget. 

When corporate tax bills are cut, governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people. For example, a 0.8 percent cut in corporate tax rates across OECD countries between 2007 and 2014 was partially offset by a 1.5 percent increase in the average standard VAT rate between 2008 and 2015. 

“There are no winners in the race to the bottom on corporate tax. Ordinary people – particularly the poorest – are paying the price for this reckless competition through increases in personal taxes and cuts to essential services, such as healthcare and education. Governments must work together to stop this crazy race to the bottom on corporate tax and ensure companies pay their fair share,” said Berkhout.

Oxfam is calling for all governments to work together to stop tax dodging and the race to the bottom on corporate tax:

• Stop unfair and unproductive tax incentives and work together to set corporate tax at a level that is fair, progressive and contributes to the collective good
• Ensure tax blacklists are based on objective, comprehensive criteria including whether or not a country offers zero rates of corporate tax; 
• Improve tax transparency by requiring all multinational companies to publish financial reports for every country in which they operate, so it is clear what taxes companies are paying and where.

‘Tax Battles: the dangerous race to the bottom on corporate tax.’

MCB is The Banker’s “2016 Bank of the Year for Mauritius”

MCB was awarded the 2016 Bank of the Year accolade for Mauritius by The Banker magazine, part of the Financial Times Group, at an awards ceremony held last night at The Hilton London Bankside. MCB has now won this trophy six times since 2008 and has retained its 2015 title. 

Luke McGreevy of The Banker, said: “The judging panel felt that MCB made the most progress over the 12 months; something which is not only in terms of the bank’s strong financials, but also in the wide range of initiatives which the bank undertook during this period. This award recognition, by the world’s longest running international banking title, is testament to the strong management, sound business model and strategy of MCB.” 

In its December 2016 edition, The Banker highlights the impressive financial results obtained by MCB in a highly sophisticated and competitive banking market. “For the second year in a row, Mauritius Commercial Bank (MCB), the country’s largest lender, has scooped the country award. This is no small feat in such a highly sophisticated and competitive banking market. But backed by impressive financial results, a sound growth strategy and a commitment to innovation, MCB emerged as a clear winner”. 

The Banker highlighted the fact that MCB has a leading position in the domestic market in terms of financing large corporates as well as small and medium-sized enterprises (SMEs). It also pointed out that MCB is “the only bank in Mauritius with a comprehensive mobile and online banking platform, known as Juice, and the only bank in Africa to offer standout mobile features including cardless ATM transactions”. 

Antony Withers, Chief Executive, MCB Limited, dedicates this award to customers and staff. “I would like to congratulate and thank our customers because they are our raison d’être and inspire us to keep moving boundaries in terms of service excellence. The award is also a true recognition of the dedication, team work and strong commitment of the staff to raising the level of service MCB provides to its customers”. 

In The Banker’s December 2016 edition, he stated that “alongside strengthening capabilities to be ready for the next growth cycle, MCB will pursue its strategic objectives across market segments. Locally, the bank will look to strengthen its relationships with its individual and non-individual customers, helped by the widening use of digital technology.”

Cassam Uteem: ‘Maurice souffre d’un manque de leadership chronique. Certains s’interrogent même s’il y aurait un pilote à bord!’

• ‘La colère gronde dans la rue. Mais quel visage de l’alternance les différentes composantes de l’Opposition parlementaire et extra-parlementaire nous présentent-elles?’
• ‘La proposition de la ‘Deuxième République’ était la recette toute indiquée pour une instabilité politique permanente’

Mauritius Times