Mauritius-Turkey to Further Strengthen Trade and Economic Relations

Mauritius and Turkey will sign on 07 February 2013 in Istanbul a Framework Agreement on Trade and Economic Cooperation and an Investment Promotion and Protection Agreement.

The agreements will be signed by the Minister of Foreign Affairs, Regional Integration and International Trade, Dr Arvin Boolell (head of delegation), for Mauritius, and the Minister of Economy, Mr Zafer Caglayan, for Turkey.

The Mauritian delegation also comprises Mr Assad Bhuglah Director of Trade Policy, Mr Mahmood Cheeroo, Secretary General of the Mauritius Chamber of Commerce and Industry (MCCI), Mr Amedee Darga, Chairman of Enterprise Mauritius, Mr Maurice Lam, Chairman of Board of Investment (BOI), and Mrs Nirmala Jeetah, Director, Policy and Planning, BOI.

At the level of the parastatal bodies and the private sector, the institutions of both Mauritius and Turkey will sign MOUs to enhance cooperation: MOU on mutual cooperation between the Turkish Investment support and Promotion Agency and BOI of Mauritius; and, MOU between the MCCI and TUSKON (Turkey Chamber of Commerce).

These agreements represent an additional step in fostering relations between both countries following the signing of a Free Trade Agreement (FTA) in September 2011.

Meetings are also scheduled between the Mauritian delegation and the Turkish business community to help identify areas for investment and trade.  Both parties will also seize this opportunity to discuss the implementation of the FTA.  Mauritius is awaiting the Turkish side to finalise its internal procedures for implementation of the FTA.  With the entry into force of the agreement, Mauritius will benefit duty free access on all industrial products including key exports such as denim, jewellery, article of leather, amongst others.  Mauritius will also benefit from preferential access on agricultural products including tuna, cut flowers and tropical fruits.

The Framework Agreement

The Framework Agreement is multi-dimensional and will help to identify concrete areas where both countries can work together especially in terms of increasing investment flows.  It will cover the following areas: Agriculture, Fisheries, Education, Health, Industry and SME development, Science and Technology.

This agreement will also help create synergies between the business communities of both countries and identify where joint venture projects could be promoted and what needs to be done to increase trade flows and remove any non trade barriers.

Negotiations on the Framework Agreement were concluded in January 2012.  Mauritius seeks, through this agreement, to further consolidate ties and spur Mauritian stakeholders to export to Turkey.

USPIRG: Offshore Tax Dodging blows $40 Billion Hole in State Budgets

With states across the country facing dire fiscal crunches and lawmakers in Washington gearing up for more budget showdowns, U.S. PIRG Education Fund released a new study revealing that state budgets were hit collectively with $40 billion in lost revenue from offshore tax dodging last year. Many of America’s wealthiest individuals and largest corporations use tax loopholes to shift profits made in America to offshore tax havens, where they pay little to no taxes. U.S. PIRG Education Fund was joined at the event by Congressman Lloyd Doggett, the Main Street Alliance, the American Sustainable Business Council, and a small business owner.

“Offshore tax abuses undermine public confidence in our tax system. They add to both the deficit and the tax burden imposed on small businesses and individuals that play by the rules,” said Congressman Lloyd Doggett (TX-35), a senior member of the House Ways and Means Committee. “In quantifying the enormous cost to our economy of tax haven abuse, U.S. PIRG has, once again, offered valuable work. More state and federal action is required to ensure that the cost of necessary security and other public services is shared fairly.”

“Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice,” according to Dan Smith, Tax and Budget Advocate for U.S. PIRG Education Fund and report co-author. “States should be using that money to benefit the public.”

All told, state taxpayers across the country lost nearly $40 billion last year from offshore tax loophole abuse. To put that amount in context, $40 billion roughly equals the total amount spent by all state and local governments on firefighters in 2008. It’s also enough money to cover the educational costs for 3.7 million children for one full year.

At the national level, offshore tax loopholes cost federal taxpayers $150 billion each year, which would be more than enough to cover the scheduled spending cuts that are set to take effect in just a few weeks.

"Our economic progress is undermined when companies are rewarded for financial manipulation rather than innovation and productive investment," said Bryan McGannon, Deputy Director of Policy at the American Sustainable Business Council.

“When corporations use offshore tax havens to avoid paying their taxes, they’re robbing states of the resources they need to lay the foundations for local, independent businesses to grow and thrive,” said Sam Blair, Network Director for the Main Street Alliance. “They’re also leaving small businesses at a direct competitive disadvantage.”

Tax havens are used by both wealthy individuals and corporations. The study found that states lost $28 billion from the corporate abuse of tax havens and $12 billion from individuals.

As of 2008, at least 83 of the top 100 publicly traded corporations in the U.S. used tax havens, according to the Government Accountability Office. At the end of 2011, 290 of the top Fortune 500 companies reported that they collectively held a staggering $1.6 trillion offshore, a Citizens for Tax Justice report found. By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us to make up the difference through cutting public services, growing our already big deficit, or raising taxes on everyday citizens.

“Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer,” Smith added.

Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:

• Google used accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” which involved two Irish subsidiaries and one in Bermuda, to help shrink its tax bill by $3.1 billion from 2008 to 2010.
• Wells Fargo paid no federal income taxes in 2008, 2009, and 2010, despite being profitable all three years, largely due to its use of 58 offshore tax haven subsidiaries.
• Microsoft avoided $4.5 billion in federal income taxes over three years by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47% of the revenue generated from its American sales, despite the fact that those products were developed and sold in the U.S.

USPIRG: The Hidden Cost of Offshore Tax Havens

When U.S. corporations and wealthy individuals use offshore tax havens to avoid paying taxes to the federal government, it is an abuse of our tax system. Tax haven abusers benefit from our markets, infrastructure, educated workforce, and security, but they pay next to nothing for these benefits. Ultimately, taxpayers must pick up the tab, either in the form of higher taxes, cuts to public spending priorities, or increased national debt.

Tax havens are countries or jurisdictions with minimal or no taxes. Corporations and individuals shift earnings to financial institutions in these countries to reduce their U.S. income tax liability - costing the federal government $150 billion in lost revenues each year.

Federal taxpayers are not the only victims of offshore tax havens. Tax havens deprive state governments of billions of dollars in badly needed revenues as well. Based how much income is federally reported in each state, and on state tax rates, it is possible to calculate how much each of the state governments lose as a result of offshore tax dodging.

In 2011, states lost approximately $39.8 billion in tax revenues from corporations and wealthy individuals who sheltered money in foreign tax havens. Multinational corporations account for more than $26 billion of the lost tax revenue, and wealthy individuals account for the rest.

• $39.8 billion would cover education costs for more than 3.7 million children for one year.
• This sum is also roughly equivalent to total state and local expenditures on firefighters ($39.7 billion) or on parks and recreation ($40.6 billion) in FY 2008.
• Table ES-1 lists the top 10 states with the most revenue lost to tax haven abuse.
• Some of the largest companies in the United States use tax havens, including many that have taken advantage of government bailouts or rely on government contracts. As of 2008, 83 of the 100 largest publically traded corporations in the United States maintained revenues in offshore tax havens, according to the Government Accountability Office.
• At the end of 2011, 290 of the top Fortune 500 companies using tax havens collectively held $1.6 trillion in profits outside the United States—up from $1.1 trillion in 2009—according to Citizens for Tax Justice. 

Federal policymakers must crack down on tax haven abuse, but with Congress often gridlocked, states should act independently to reduce the impact of offshore tax havens on state budgets.

States can act immediately to restore fairness to the tax system and minimize the fiscal impact of offshore tax haven abuse through policy changes that will close loopholes and increase their ability to detect and penalize tax avoidance.

For example:

1. States can “decouple” their tax system from the federal tax system. Because states typically use the same definitions of income as those in the federal tax code, they automatically lose money when tax haven users don’t report income to the federal government. Decoupling would help prevent those automatic losses. Rather than allow income that has been shifted out of sight from federal tax authorities to diminish the tax baseline, states can close loopholes that restore this hidden income.
2. States can require worldwide combined reporting for multinational corporations. Combined reporting is the practice of treating the parent and subsidiary companies of a multinational corporation as one corporation for the purpose of calculating taxes. Adding up all profits earned worldwide by a company, and then taxing a share of those combined profits according to the company’s level of activity in each country, would eliminate the tax benefits of shifting profits to tax havens such as Bermuda or Ireland. 
3. States should urge their federal representatives to reject a “territorial” tax system, which would further erode state revenue. Such a system would allow companies to bring all of the profits they have parked offshore in tax havens back into the United States without paying U.S. taxes.
4. States can require increased disclosure of financial information about corporations’ business presence in other countries and how they price their transfers with their own foreign subsidiaries; as well as to explain why large disparities exist between the profits corporations report to shareholders and tax authorities. These measures would provide more information for state authorities to search for red flags, decide when to audit, and crack down on abuse.
5. States could withhold taxes as part of federal FATCA withholding. The Foreign Account Tax Compliance Act (FATCA) prescribes a 30 percent federal withholding tax on companies that transfer funds to foreign financial institutions that do not comply with U.S. disclosure and reporting requirements. States that collect income taxes could withhold state taxes on these funds at the same time.

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EU - Anti-Money Laundering: Stronger rules to respond to new threats

The European Commission has today adopted two proposals to reinforce the EU's existing rules on anti-money laundering and fund transfers. The threats associated with money laundering and terrorist financing are constantly evolving, which requires regular updates of the rules.

Internal Market and Services Commissioner Michel Barnier said: "The Union is at the forefront of international efforts to combat the laundering of the proceeds of crime. Flows of dirty money can damage the stability and reputation of the financial sector, while terrorism shakes the very foundations of our society. In addition to the criminal law approach, a preventive effort via the financial system can help to stop money-laundering. Our aim is to propose clear rules that reinforce the vigilance by banks, lawyers, accountants and all other professional concerned."

Home affairs Commissioner Cecilia Malmström said: "Dirty money has no place in our economy, whether it comes from drug deals, the illegal guns trade or trafficking in human beings. We must make sure that organised crime cannot launder its funds through the banking system or the gambling sector. To protect the legal economy, especially in times of crisis, there must be no legal loopholes for organised crime or terrorists to slip through. Our banks should never function as laundromats for mafia money, or enable the funding of terrorism."

Today's package, which complements other actions taken or planned by the Commission in respect of fight against crime, corruption and tax evasion, includes:

• A directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing
• A regulation on information accompanying transfers of funds to secure "due traceability" of these transfers

Both proposals fully take into account the latest Recommendations of the Financial Action Task Force (FATF), the world anti-money laundering body, and go further in a number of fields to promote the highest standards for anti-money laundering and counter terrorism financing.

More specifically, both proposals provide for a more targeted and focussed risk-based approach.

In particular, the new Directive:

• improves clarity and consistency of the rules across the Member States
• by providing a clear mechanism for identification of beneficial owners. In addition, companies will be required to maintain records as to the identity of those who stand behind the company in reality.
• by improving clarity and transparency of the rules on customer due diligence in order to have in place adequate controls and procedures, which ensure a better knowledge of customers and a better understanding of the nature of their business. In particular, it is important to make sure that simplified procedures are not wrongly perceived as full exemptions from customer due diligence.
• and by expanding the provisions dealing with politically exposed persons, (i.e. people who may represent higher risk by virtue of the political positions they hold) to now also include “domestic” (those residing in EU Member States) (in addition to 'foreign') politically exposed persons and those in international organisations. This includes among others head of states, members of government, members of parliaments, judges of supreme courts.
• extends its scope to address new threats and vulnerabilities
• by ensuring for instance a coverage of the gambling sector (the former directive covered only casinos) and by including an explicit reference to tax crimes.
• promotes high standards for anti-money laundering
• by going beyond the FATF requirements in bringing within its scope all persons dealing in goods or providing services for cash payment of €7,500 or more, as there have been indications from certain stakeholders that the current €15,000 threshold was not sufficient. Such persons will now be covered by the provisions of the Directive including the need to carry out customer due diligence, maintain records, have internal controls and file suspicious transaction reports. That said, the directive provides for minimum harmonisation and Member States may decide to go below this threshold.
• strengthens the cooperation between the different national Financial Intelligence Units (FIUs) whose tasks are to receive, analyse and disseminate to competent authorities reports about suspicions of money laundering or terrorist financing.

The two proposals foresee a reinforcement of the sanctioning powers of the competent authorities by introducing for instance a set of minimum principle-based rules to strengthen administrative sanctions and a requirement for them to coordinate actions when dealing with cross-border cases.

STEP Mauritius Conference 2013 - Mauritius: Africa's Private Wealth Management Centre

Conference Programme Focus

• Africa’s Growing Wealth: The Opportunities and Challenges for Mauritius as a Regional IFC
• Changing Global Regulatory Landscape: The Supranational Initiatives & their Impact on IFCs
• Estate Planning and Wealth Management for HNWIs in the Gulf: The Possibilities
• Creating a Successful and Efficient Family Office for African HNWIs
• Trusts à la Mauricienne: The Challenges of Setting up a Trust for Mauritian Residents
• South Africans and Offshore Trusts
• Trust Protectors in Estate Planning: Benefits and Risks
• Exchange of Information and Impact on IFCs
• Understanding The Foundation as a Wealth Management Tool for Islamic Succession Planning: Learning from Labuan
• The Big Debate: Trusts vs Foundations

Start date:9 April 2013End date:10 April 2013

Location:Le Méridien

 Village Hall Lane
Pointe Aux Piments

 Mauritius

Organiser:STEP Mauritius

Contact:STEP Conferences

Description:Mauritius: Africa's Private Wealth Management Centre

Heritage Foundation - Unleashing the U.S. Investor in Africa: A Critique of U.S. Policy Toward the Continent

African investment expert Peter C. Hansen spoke on the future of U.S. investment policy in Africa at The Heritage Foundation on November 2, 2011. Hansen explained that U.S. investors generally avoid Africa because the financial risks are simply too high. Basic legal tools for protecting investors are bilateral investment treaties (BITs) and double tax treaties (DTTs). The U.S. has six BITs and one DTT with sub-Saharan Africa—far fewer than its major economic competitors, including China. The U.S.’s lack of effort to secure such protections reveals that too many U.S. officials are unconcerned with U.S. investor needs in possibly the world’s toughest investment environment. They also do not seem to consider U.S. private investment a critical component of U.S. strategic interests in Africa— a critical strategic error that must be corrected.

Key Points

1. There is a fundamental problem with U.S. government thinking about African development: A mistaken assumption that mainstream U.S. companies are motivated more by higher rewards than by the diminishment of risks in African investments.
2. The reality is that U.S. investors generally avoid Africa because the risks are simply too high.
3. Basic legal tools for protecting investors are bilateral investment treaties (BITs) and double tax treaties (DTTs). The U.S. has six BITs and one DTT with sub-Saharan Africa—far fewer than major competitors, including China.
4. The U.S. should unleash its greatest economic force—U.S. investors—in Africa. Tens of thousands of entrepreneurs, small businesses, and Fortune 500 companies could bring immense know-how and growth to Africa.
5. With basic legal protections, U.S. investors could unleash a flood of development and prosperity in Africa, and send vast revenues to the U.S. that would be just a small part of the wealth created for Africa.

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Tax Competition and the Myth of the 'Race to the Bottom': Why Governments Still Tax Capital

Briefing Paper

Vera Troeger, February 2013

• The majority of OECD countries have only experienced minor effects of capital market integration and capital tax competition since the mid-1980s. There have undoubtedly been some winners, mainly capital owners in larger liberal market economies, and some losers, especially large continental European welfare states.
• Not only have the dire predictions of the early doom theories not materialized; they have failed. Therefore, there is much to be gained in making the key assumptions underlying traditional tax competition models much more realistic, particularly in terms of predicting the impact of globalization on Western democracies.
• Tax competition affects countries differently and does not lead to a 'race to the bottom' since capital remains incompletely mobile. The competitiveness of a country determines fiscal adjustment strategies by others. Cutting capital taxes, therefore, will not necessarily generate more capital inflows.
• Tax competition and taxation have broader implications for the fiscal responses of countries to globalization and their redistribution efforts. Given that tax competition affects countries differently, governments will choose diverse strategies to cope with these international pressures. Competition will more negatively affect income inequality in countries that predominantly redistribute via the tax system than in those that historically set up a welfare state by redistributing via social transfers.

Download paper here

Australia: ACCC commences Federal Court proceedings against Visa Inc

The Australian Competition and Consumer Commission has commenced proceedings in the Federal Court against Visa Inc (Visa), and a number of related Visa entities, alleging contraventions of the Competition and Consumer Act 2010 in relation to dynamic currency conversion services (DCC).

The ACCC alleges that Visa, the operator of the world's largest retail electronic payments processing network, misused its market power for the purposes of:

• preventing the expansion of DCC to new merchant outlets in Australia, such as retail stores; and
• preventing businesses in Australia from supplying DCC services on ATMs in competition with Visa’s own currency conversion service. 

The ACCC alleges that Visa earned less revenue when a cardholder selected DCC than when a cardholder used Visa’s own currency conversion service. 

“The ACCC is concerned that Visa sought to stop the growth of competing dynamic currency conversion services and, as a result, limit the choices available to consumers,” ACCC Chairman Rod Sims said.

DCC gives international cardholders the choice of completing a transaction in their home currency or in the local currency of the retail store or ATM.  If a cardholder chooses DCC, the exchange rate is locked in and disclosed to the cardholder at the time of making a transaction. This provides cardholders with certainty about the exchange rate applied and reduces the risk to cardholders from subsequent changes in exchange rates.  

It is alleged in the proceedings that from May 2010 to October 2010, Visa implemented and maintained rules which prohibited the further expansion of the supply of DCC services on point of sale (POS) transactions on the Visa network by its rival suppliers of currency conversion services in many parts of the world, including in Australia. The ban meant that merchants that were not already offering DCC to their customers as at 30 April 2010 could not choose to offer DCC.  In effect, this froze the pool of merchants who could offer DCC during the period in which the ban was in force.

It is also alleged that from at least October 2007 to date, Visa has banned the use of DCC on transactions at ATMs using Visa cards in Australia.

The ACCC also alleges that Visa engaged in exclusive dealing, by supplying access to its payment network to Australian banks and in turn, retailers, on condition that they didn’t acquire DCC services from DCC suppliers.

Mr Sims said, “The alleged conduct by Visa gives rise to three concerns for the ACCC.  First, it is alleged that travellers to Australia using a Visa payment card do not get to choose who does their currency conversion when withdrawing cash from an ATM.  In particular, they are denied the ability to know the cost of transactions in their own currency at the time the transaction is made. 

Second, the ACCC alleges that Australian retailers were denied the opportunity to share in the revenue from processing DCC transactions at new merchant outlets.

Finally, it is alleged that Australian suppliers of DCC services were, and continue to be, denied the opportunity to compete with Visa in relation to DCC services at ATMs”, he said.

Mr Sims also said, “Pursuing companies who misuse their substantial market power, to the detriment of consumers and small businesses in particular, as is alleged against Visa in these proceedings, is an enforcement priority for the ACCC”. 

The ACCC is seeking penalties, declarations and costs against Visa and the other Visa entities joined as respondents to these proceedings. 

The matter has been set down for a directions hearing before Justice Jacobson at 9:30am on 14 March 2013.

Legal Week: Rise of Russia

Ogier's Wiliam Simpson and Bourn Collier explore the ways offshore centres are refining their offerings to attract Russia-based investor

Legal Week: A land for all reasons

Collas Crill's Wayne Atkinson and Kit Hobbs talk about how Guernsey's cleantech industries are sound investments for offshore clients

Legal Week: Horses for courses

Carey Olsen's Russell Clark explains the benefits of Guernsey foundations to lawyers and their clients

Legal Week: Tropic thunder

Bedell Partnership's Yuvraj Juwaheer talks up Mauritius' attempts to tackle round-tripping and money laundering

Legal Week: Gambling on success

Appleby's Claire Milne looks at how the Isle of Man is protecting its position as a prime jurisdiction for online gambling

Lee Kuan Yew: The Grand Master's Insights on China, the United States, and the World

A new book captures the thinking of a great global strategist

When Lee Kuan Yew speaks, who listens? Presidents, prime ministers, chief executives, and all who care about global strategy.

Graham Allison and Robert Blackwill, two leading strategic thinkers,asked Lee Kuan Yew the toughest questions that matter most to thoughtful Americans weighing the challenges of the next quarter century. Drawing on their in-depth interviews with Lee as well as his voluminous writings and speeches, the authors extract the essence of his visionary thinking. The questions and answers that constitute the core of the book cover topics including the futures of China and the United States, U.S.-China relations, India, and globalization.

Lee Kuan Yew does not retell the well-known story of Singapore’s birth and growth to first-world status. Nor do the authors interject their own thoughts or try to psychoanalyze Lee. Instead, they present his strategic insights in his own words. The result is textured and comprehensive, yet direct and succinct. Allison and Blackwill bring to bear their own experience as veteran government officials and senior scholars; their questions focus on essential policy choices as the U.S. pivots toward Asia.

Lee, the founding father of modern Singapore and its prime minister from 1959 to 1990, has honed his wisdom during more than a half century on the world stage. He has served as a mentor to every Chinese leader from Deng Xiaoping to Xi Jinping, and as a counselor to every U.S. president from Richard Nixon to Barack Obama. With his uniquely authoritative perspective on the geopolitics of East and West, Lee does not pull his punches.

A few examples:

• Are China’s leaders serious about displacing the U.S. as Asia’s preeminent power in the foreseeable future? “Of course. Why not? Their reawakened sense of destiny is an overpowering force.”
• Will China accept its place within the postwar order created by the United States? “No. It is
• China’s intention to become the greatest power in the world—and to be accepted as China, not as an honorary member of the West.”
• Will India match China’s rise? “Not likely. India is not a real country. Instead, it is 32 separate nations that happen to be arrayed along the British rail line.”
• On competition between East and West: “Westerners have abandoned an ethical basis for society, believing that all problems are solvable by a good government. . . . In the East, we start with self-reliance.”

About the Belfer Center Studies in International Security:

Lee Kuan Yew: The Grand Master’s Insights on China, the United States, and the World is the latest volume in the Belfer Center Studies in International Security, a book series edited at the Belfer Center for Science and International Affairs at the Harvard Kennedy School and is published by The MIT Press. The series publishes books on contemporary issues in international security policy, as well as their conceptual and historical foundations. 

IFC Review - Offshore in Practice: Enhance Global Prosperity via IFCs

Grant Stein, Walkers highlights the part IFCs play in the global movement of wealth and examines the 'vital role' that IFCs play in the global economy

IFC Review - Cyprus: At the Cutting Edge of Trust Developments

Cyprus is well known for its well established trusts sector, Elias Neocleous and Philippos Aristotelous explain how popular the sector, especially with Russian and other CIS investors.

IFC Review: Q&A with Pascal Saint-Amans, Director of the Centre for Tax Policy and Administration, OECD

The IFC Review speaks to Pascal Saint-Amans, Director for the Centre of Tax Policy and Administration about the progress and objectives of the OECD’s policies.

IFC Review: Q&A with Mark Field, MP for the Cities of London & Westminster

The IFC Review speaks to Mark Field MP for the cities of London and Westminster, a vocal proponent of International Finance Centres.

IFC Review: Due Diligence – Innovation

In his latest column, Burke Files, FEE Inc examines the reasons behind the bankruptcy of Michael Porter's Monitor Group and warns there is no short cut to fiscal alchemy

IFC Review - Offshore Financial Centers: Finding the Right Balance

Since the economic crisis of 2008-09, Offshore Financial Centres are again the focus of the world, Alfred Schipke, IMF highlights the trouble many OFCs have in finding the right balance in regulation.

IMF Consultation Mission in Mauritius

The Gross Domestic Product (GDP) growth rate is projected to increase to 3.7% for the year 2013, subject to a strong growth in the fisheries, information and communication technology and financial services sectors, says the International Monetary Fund (IMF) in its concluding remarks in the context of the 2013 Article IV Consultation mission in Mauritius.

At a press conference held yesterday in Port Louis, Mr Martin Petri, who is leading the consultation mission from 16 to 30 January, stated that this growth rate is achievable owing to prudent macroeconomic policies adopted in 2012 which have resulted in good fiscal and inflation outcomes.

For the year 2013, Mr Petri said that the challenge for Mauritius, according to him, is to accelerate growth and set the foundation for future growth, through increased public and private investment and productivity advances.

In his statement he underlined that compared to the year 2012, the external environment for 2013 is much better as the downside risks in the aftermath of the global financial crisis and the Euro zone crisis have decreased. According to him, though year 2013 is full of challenges to overcome, these factors will have less impact on the GDP growth rate in Mauritius and the economy is far from the worst case scenario of registering a growth rate of less than 2%.

Mr Petri also pointed out that while investment is likely to increase, driven by public investment projects, private investment is expected to remain subdued. In addition, he said that medium-term fiscal consolidation should continue to reduce external imbalances and economic vulnerabilities. As regards inflation, the mission noted that the current 4% rate is low but inflationary pressures could emerge in 2013 from wage pressures in the private sector as well as with an increase in public sector wages. As for the headline consumer price index inflation, the mission projects an increase to 5.7% on average in 2013 but cautioned the authorities to stand ready to tighten monetary conditions if inflation accelerates.

Other salient issues discussed in the course of the IMF mission are: the labour market issues where the IMF noted that the unemployment rate of 8% is high, the review of the current National Pension Fund system to ensure that its resources are adequate to pay pensions over the long run. In this context, Mauritius has already embarked on a project with the collaboration of the World Bank to develop pension models, added Mr Petri.

Similarly, Mr Petri spoke on low savings rate prevailing in Mauritius, which stands at 15% of the Gross Domestic Product (GDP) while investment has remained constant during the past year that is at 25% of the GDP. On this score, he recommends that policies should be adopted to encourage savings as according to the forecast of the IMF the persistently large external current account deficit reflects low savings and could give rise to future vulnerabilities. Hence, the mission suggested that this should be addressed through policies to promote national savings and foster competitiveness, which will require longer-term adjustments to reduce fiscal deficits and to help build human capital and infrastructure.

The mission also expressed concerns regarding the constraints in the water sector and the traffic congestion problem where the IMF stands ready to provide support and work together with Mauritian authorities to address the issues. 

Mr Petri reiterated IMF’s commitment to assist Mauritius to implement its economic programme through the provision of technical support which the country is already benefitting from the Africa Regional Technical Assistance Center South (AFRITAC South) established in Mauritius since July 2011. The Centre is providing technical support to countries in the region for developing and implementing capacity-building programmes in several areas, such as macroeconomic policy, macro-fiscal policy and public financial management.

It will be recalled that in the course of the mission, the delegation met with the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Xavier-Luc Duval, the Governor of the Bank of Mauritius, Mr Rundheersing Bheenick, senior government officials, as well as representatives of the National Assembly, the private sector and the civil society.

IMF Working Paper: Exchange Rate Liberalization in Selected Sub-Saharan African Countries Successes, Failures, and Lessons

Many sub-Saharan African (SSA) countries liberalized their economies in the 1980s and early 1990s. This paper reviews the foreign exchange regime reforms in selected SSA, and their associated macroeconomic policies and economic performance during and after these reforms were undertaken. Before liberalization, most of the reviewed countries were characterized by extensive foreign exchange rationing, sizeable black market premiums, and declining per capita real income. Today, the countries that successfully reformed look markedly different. Rationing and parallel market spreads are a distant memory, and per capita income has increased sharply.

IMF Working Paper: Determinants of Bank Interest Margins in Sub-Saharan Africa

Financial intermediation is low in sub-Saharan Africa (SSA) compared to other regions of the world. This paper examines the determinants of bank interest margins using a sample of 456 banks in 41 SSA countries. The results show that market concentration is positively associated with interest margins, but the impact depends on the level of efficiency of each bank. In particular, compared to inefficient banks, efficient ones increase their margins more in concentrated markets. This indicates that policies that promote competition and reduce market concentration would help lower interest margins in SSA. The results also show that bank-specific factors such as credit risk, liquidity risk, and bank equity are important determinants of interest margins. Finally, interest margins are sensitive to inflation, but not to economic growth or public or foreign ownership. There are regional differences within SSA regarding the level of interest margins even after controlling for other factors.

IMF Concludes 2013 Article IV Consultation Mission to Mauritius

An International Monetary Fund (IMF) mission led by Martin Petri visited Port Louis during January 16–30, 2013 to conduct the discussions for the 2013 Article IV consultation with Mauritius. The mission met with The Honorable Vice Prime Minister and Minister of Finance and Economic Development Xavier-Luc Duval, Governor of the Bank of Mauritius Rundheersing Bheenick, other senior government officials, as well as representatives of the National Assembly, the private sector, and civil society.

At the conclusion of the visit, Mr. Petri issued the following statement today in Port Louis:

“Prudent macroeconomic policies continued in 2012, resulting in good fiscal and inflation outcomes. The challenge in 2013 will be to accelerate growth in a still difficult external environment and to set the foundation for future growth, through increased public and private investment and productivity advances. In addition, medium-term fiscal consolidation should continue to reduce external imbalances and economic vulnerabilities. Staff projects that growth in the real gross domestic product in 2013 will increase to 3.7 percent, fueled by strong growth in fishery, information & communications technology, and financial services. Investment is likely to increase, driven by public investment projects, while private investment is expected to remain subdued.

“At around 4 percent, inflation is low at the moment, but inflationary pressures could emerge in 2013 from wage pressures in the private sector linked to the decision to increase public sector wages and from possible adjustments in some administered prices. The mission projects headline consumer price index inflation to accelerate to 5.7 percent on average in 2013 and decline thereafter. The current monetary policy stance is broadly appropriate, but the authorities should stand ready to tighten monetary conditions if inflation accelerates. The developments in the real estate sector should continue to be monitored carefully, both in terms of price and rental growth and with respect to the impact on the banking sector. Overall, the banking sector appears robust, and the financial system has proven resilient.

“The 2013 budget aims to support growth and ensure sound macroeconomic management. Compared to 2012, the overall fiscal deficit is projected to increase modestly. Given the need for debt reduction over the medium term, and the likely limited impact of a discretionary fiscal stimulus in a small open economy with a flexible exchange rate regime, staff would recommend a fully neutral fiscal stance in 2013, similar to the one achieved in 2012. The authorities’ medium-term fiscal consolidation plans are welcome to reduce external imbalances, mitigate debt vulnerabilities and rebuild policy buffers.

“The persistently large external current account deficit reflects low savings and could give rise to future vulnerabilities. This should be addressed through policies to promote national savings and foster competitiveness, which will require longer-term adjustments to reduce fiscal deficits and to help build human capital and infrastructure. These policies should be initiated soon or reinforced, and implemented steadfastly, particularly for investments and reforms related to public utilities and road decongestion. The Mauritian authorities are cognizant of these challenges and have continued their efforts to implement structural reforms to address key growth-impeding bottlenecks. In view of Mauritius’ well-established track record as an economic reformer with a dynamic private sector and robust institutions, these challenges appear manageable, but they require renewed effort.

“The IMF stands ready to assist the authorities in the implementation of their economic program, including through the provision of technical assistance, and looks forward to continued fruitful policy dialogue in the period ahead.”

Mauritius: Speech of FSC Chief Executive at MIPA Forum, FSC House

Forum on the changes brought to the FRA 2004 organised by MIPA

Welcome Speech by FSC Chief Executive Miss Clairette Ah-Hen

FSC House, Tuesday 29th January 2013

Ladies and Gentlemen

Good afternoon

We welcome the initiative of the MIPA for holding this forum, which provides an opportunity to discuss some of the amendments brought by the Economic and Financial Measures (Miscellaneous Provisions) Act 2012. It is also an opportunity for the FSC to welcome you all at the FSC House.

The purpose of this forum is to highlight the changes brought to the Financial Reporting Act 2004 in December 2012 by the Economic and Financial Measures (Miscellaneous Provisions) Act 2012. The change brought in this piece of law is not isolated for only Mauritius but it is responding to the calls made internationally for a more substantial role to be played by auditors and accountants across the globe.

The global financial crisis has sparked a series of high level inquiries into the role and effectiveness of audit, be it in the US, Europe or the UK, while in Singapore regulators are engaging actively with stakeholders to assess how audit can be enhanced. The IAASB, the standard setter for auditing, is currently pursuing improvements to the auditors’ report. I am sure you will have many other opportunities to discuss these issues with MIPA and FRC.

Closer to use, we have the World Bank visiting Mauritius from January 24, 2011 to February 4, 2011 to undertake the Second Mauritius Report on Observance of Standards and Codes with respect to Review of Accounting and Auditing Practices (“ROSC A & A”). The key recommendations contained in the ROSC A&A report relates to the Statutory Framework, the profession - strengthen MIPA, Professional Education and Training, Ensuring compliance with accounting and auditing standards. I am sure, all of us here present would like to see these put in place and I do believe that the Economic and Financial Measures (Miscellaneous Provisions) Act 2012 contains some of these recommendations.

We at the FSC, we look forward to a close Collaboration and cooperation with all stakeholders, be it with the FRC with which the FSC signed an MOU last year or FIU with which we have an MOU which dates to quite some time back or with Accountants and auditors through workshop industry updates. We all share that common goal which is to see Mauritius develop its financial services sector.

I wish you all a successful deliberation.

Thank you for your attention.

Mauritius: New Regulations for Import of Second-Hand Vehicles

The Minister of Industry, Commerce and Consumer Protection, Cader Sayed-Hossen, recently announced that following numerous complaints and representations made by the Associations of motor car dealers and the general public as regards the importation of damaged and accidented vehicles on the local market, his ministry has amended the Regulations to make it mandatory for every importer of second-hand motor vehicles to submit an auction sheet.

With the new Regulations which will be effective on 1 March 2013, each importation of second-hand motor vehicle should be supported by an auction sheet which will specify the grade of the vehicle which shall not be below 3.5 on a scale of 1 to 5. The auction sheet is an important document which is issued by the auctioneers certifying the details of the vehicle.

Authorised dealers in second-hand motor vehicles will also have to affix the auction sheet and the Pre-Shipment Certificate on the windscreen of each vehicle at their showroom premises together with an explanatory note specifying the grade of the vehicle as per the auction sheet of that particular vehicle. This measure will go a long way in protecting the consumers as they will be more informed as to the exact conditions of the vehicles being purchased.

In the same line, Cader Sayed-Hossen stated that the Ministry of Industry, Commerce and Consumer Protection will regulate the importation of second-hand motor vehicles by agents acting on behalf of importers. “It has been noted that over the years that some persons import their vehicles through ‘agents’ who are not recognised by law and act merely as facilitators against payment of fees. This state of affairs has given rise to a number of complaints where individuals have been penalised by unscrupulous ‘agents’”, minister Sayed-Hossen opinioned.

With a view to remedying this situation, the ministry proposes to regulate the sector by introducing new Regulations. The aim is to provide a legal framework to allow the “agent” to operate in a fair and transparent manner while protecting the interests of the consumers. Draft regulations have been prepared and are presently at the State Law Office for vetting and further discussions.

Vistra acquires BSI Trust Singapore from BSI Bank AG

BSI Trust Corporation (Singapore) Limited., owned by BSI Bank AG has been acquired by Vistra, a global independent player in the trust and fiduciary sector, the two companies announced today. 

The acquisition, approved by the Monetary Authority of Singapore (MAS) will see all BSI Trust Singapore's services and existing business transferred to Vistra by the end of January 2013.

The decision to sell the company is a reflection of the rapid growth of BSI Bank's wealth management portfolio over the past two years and the need to focus on these core advisory services.

This strategic decision will provide a strong platform of specialist solutions for BSI clients transferring their trust needs to Vistra. Private banking clients' international trust requirements are evolving and increasingly require more sophisticated trust solutions for asset protection and estate planning.  Vistra is equipped to provide clients with a broad range of trust and fiduciary services through its network of 25 offices across 19 jurisdictions. Vistra will be one of the preferred service providers on BSI's open architecture platform.

Vistra Singapore Managing Director, Jean-Pierre Koolmees said, "We are very proud of the reputation and the international capability we have established in the trust sector. Our aim is to provide the highest standard of service to the clients of BSI Trust Singapore who have now entrusted us with their business."

"The highly-experienced team joining us from BSI Trust Singapore will ensure continuity for their existing clients, as well as augment Vistra's overall offering to clients," Mr. Koolmees added.

Haiti: Soon Haitian-flagged vessels

Alix Célestin, the Director General of the National Port Authority (APN), accompanied by the Technical Director, Canégy Nacesse Pierre and of Philippe Olivier, Special Advisor to the Prime Minister, met in Paris the management of "OCRA Worldwide" which handles the registration of merchant ships and pleasure craft, to finalize the procedures allowing the Haitian flag to fly to the masts of merchant ships, super yachts and yachts that ply the world's seas.

The mission of the Primature and of the APN, is part of the policy of openness of the Martelly-Lamothe government , which requires that the presence of Haiti, occurs in all fields of economic activity, in order to send to the whole world, the clear message that "Haiti is open for business."

From a financial standpoint, it will be an important contribution to the economy of Haiti, with the income generated by the registration of these Haitian-flagged vessels.

Haïti: Bientôt des navires sous pavillons haïtien

Alix Célestin, le Directeur Général de l’Autorité Portuaire Nationale (APN), accompagné de son Directeur Technique, Canégy Nacesse Pierre et de Philippe Olivier, Conseiller Spécial du Premier Ministre, ont rencontré à Paris les responsables de la « OCRA Worldwide » qui s'occupe de l'enregistrement des navires marchands, et bateaux de plaisance, pour finaliser les démarches permettant au drapeau haïtien de flotter comme pavillon, aux mats des navires marchands, super yachts et voiliers de plaisance, qui sillonnent les mers du monde entier.

Cette démarche de la mission de la Primature et de l'APN, s'inscrit dans le cadre de la politique d'ouverture du Gouvernement Martelly-Lamothe, qui veut que la présence d'Haiti, se manifeste dans tous les champs d'activités économiques, en vue de lancer au monde entier, le message clair que « Haiti is open for business».

Du point de vue financier, ce sera d'un apport important, pour l'économie d’Haïti, grâce aux revenus générés par les enregistrements de ces navires sous pavillon haïtien.

Chatham House - Madagascar: Time to Make a Fresh Start

Programme Paper

Bob Dewar, Simon Massey, and Bruce Baker, January 2013

• Madagascar's presidential and legislative elections are scheduled for 2013. These elections could herald a fresh start for Madagascar which had been hindered by the intense rivalry between the country’s two leading political protagonists: Andry Rajoelina, president of the incumbent transitional regime, and Marc Ravalomanana, the ousted head of state. Both men have finally indicated they will not run for office in the 2013 elections: keeping to their word is vital.  

• Regional and international partners are already coordinating their management of the crisis. They must now step up their efforts to steer Madagascar’s political class and military towards the implementation of a settlement that maintains civil peace and delivers credible elections. Then, with renewed donor support, the country can hope to revive exports, investment and a sustained drive for poverty reduction.

• Madagascar may not show levels of violence and traumatic disruption to compare with those in 'hot' crises elsewhere, but it is a slow-burning social and economic disaster. The overthrow of constitutional rule in 2009 provoked cuts to external aid and the exclusion of Malagasy exports from vital access privileges to the important US market.

• Despite donor efforts to maintain a drip feed of support for critical services, the UN reports that deprivation has deepened, particularly among children, in a country where incomes were already among Africa’s lowest. The crisis has also hurt a once vigorous manufacturing sector and threatens lasting damage to a natural environment of global importance.

• Madagascar’s economic development depends on full access to international aid, investment and confidence. If political manoeuvres or administrative failings undermine the democratic credibility of the elections, the international community and the African Union will need to refresh their strategy. They will need to reconcile the credible defence of democratic principles with reviving the development and growth denied to Madagascar’s people over the past four years of political deadlock. 

Download paper here

Mauritius: Double Taxation Avoidance Agreement with the Republic of Rwanda

A Double Taxation Avoidance Agreement was signed with the Republic of Rwanda in July 2001 and the Agreement came into force in April 2003. In June 2012 the Republic of Rwanda submitted to Mauritius a notification of termination of the Double Taxation Avoidance Agreement.

In that regard, Mauritius initiated discussions with the Rwandan Government and the two parties have agreed to renegotiate the existing Agreement. Thus, a first round of negotiations was held in Kigali in November last year. A second round of negotiations is scheduled to take place in the second week of February 2013 in Mauritius. One of the pending issues that remain to be resolved concerns the timing of the entering into force of the renegotiated Agreement and the termination of the existing one. Mauritius has proposed that the existing Agreement should be terminated only upon entry into force of the renegotiated Agreement.

Once the discussions on the renegotiated Agreement are finalized, Mauritius will press for an early signing and ratification of the Agreement so that cross border trade and investments between Mauritius and Rwanda can continue to take place under the most conducive environment.

Jersey starts the year with further award success for its finance industry

Jersey has been judged the International Financial Centre of the Year in the Citywealth International Financial Centre Awards 2013 in London.

Now in its second year, the Citywealth IFC Awards were launched to promote excellence and adherence to global tax standards and for the first time this year they included a category for top International Financial Centre. Citywealth is a leading events and publishing group that connects global wealth management and private client experts.

The awards are based on votes online which are monitored by an international panel of judges from all sectors with experience of working with advisors in all the jurisdictions covered. In the IFC award category, Jersey received 33 per cent of all the votes including a proportion of that total (22%) directly from the London market, (18%) from Switzerland and (8%) from family offices and wealthy private individuals.

Karen Jones, editor of Citywealth, commented:

“Jersey has received criticism and praise for implementing tough standards for those operating on the island to help businesses comply with international requirements as the world takes a dim view of tax evasion. In 2013 their strategy is starting to pay off and this win consolidates their position as a leading international finance centre.”

Gary Hales, Jersey Finance’s business development representative in London, received the award on January 24th at the ceremony at the Landmark Hotel in London hosted by broadcaster Michael Portillo. 

Geoff Cook, CEO of Jersey Finance commented:

“It’s important that Jersey continues to be judged positively and consistently for the quality of its services and regulation and we are delighted to have secured this latest award from Citywealth, the fourth such accolade Jersey has received in the last twelve months.”

Last year, Jersey was judged as the ‘best offshore centre’ in the annual investment management awards organised by Global Investor magazine, part of Euromoney. It also won the award of ‘best international finance centre’ at the International Fund & Product Awards organised by Incisive Media and ‘outstanding international wealth financial centre’ in the Private Banker International Awards.

Mauritius: New service fees for Tax Residence Certificate

New service fees will be charged by the Mauritius Revenue Authority for the issue or renewal of the Tax Residence Certificate (TRC) as follows:

Collective Investment Scheme: USD1,000 per TRC

Other cases: USD200 per TRC

TRC will now be issued in a new format

Mauritius: Double Taxation Avoidance Agreement (Republic of Zambia) Regulations 2012

Double Taxation Avoidance Agreement (Republic of Zambia) Regulations 2012

Mauritius: FSC Conducts Onsite Inspections for 159 Management Companies

The Financial Services Commission (FSC) has, under phase 1 of onsite inspections programme for the year 2012, conducted inspections for some 159 management companies (MC). In the wake of this exercise, 65 inspections reports have been generated out of which 45% are clean reports.

In this context, the FSC organised a workshop yesterday at its seat in Ebène targeting Directors and Senior Management representatives to discuss the key findings of the reports. It is noted that most of the MCs have proper systems for both internal and external controls and are in compliance with the Financial Services Act (FSA) adopted in 2007, which simplify the regulatory regime and consolidate the legislative framework of the global business sector.

However, some drawbacks have also been detected where some MCs do not comply with the norms under the FSA 2007 and the Customer Due Diligence requirements are not met fully. Other shortcomings pointed out are that some MCs have neither the methodology to conduct independent checks nor good record keeping, in addition to weaknesses with regard to client monitoring.

In her address at the opening of the workshop the Chief Executive of FSC, Ms Clairette Ah-Hen, recalled that the role of the commission as a regulator of the global business sector is to ensure that a licensee is complying or has complied with the requirements as outlined in the FSA 2007. In so doing, this will maintain the reputation of Mauritius as an International Financial Centre and also as a jurisdiction of substance, she said.

Ms Ah-Hen, cautioned that the FSC will take severe actions against the MCs which are not in compliance with the financial laws. The failure of not abiding to the rules may result in the revocation of the licence, she warned.

It will recalled that, the FSC is introducing as from this year an in-principle approval system for a certain period of time whereby all MCs will be required to put in place the appropriate resources and appoint adequate staffs. A MC will be issued with a licence only after the FSC has conducted an inspection to see whether the criteria have been met and upon satisfactory results.

Jersey Finance welcomes pan-Crown Dependencies Double Taxation Agreements

Jersey Finance has welcomed the signing of Double Taxation Agreements (DTAs) between the authorities in Jersey and counterparts in Guernsey and the Isle of Man as a reflection of the Crown Dependencies’ commitment to cooperation on tax matters.

The DTAs ensure that both corporate and personal financial flows, such as business profits and dividends, and income from pensions or employment, between the jurisdictions are not taxed twice. They also reinforce Jersey’s commitment to exchanging information on request through its existing network of Tax Information Exchange Agreements (TIEAs).

The agreements were signed this week in London by Assistant Chief Minister with responsibility for External Relations for Jersey, Senator Sir Philip Bailhache, Deputy Chief Minister of Guernsey, Deputy Jonathan Le Tocq, and Treasury Minister for the Isle of Man Eddie Teare MHK.

Geoff Cook, CEO, Jersey Finance said:

“As well as facilitating further business between the Crown Dependencies by affirming a robust taxation framework for financial flows between Jersey, Guernsey and the Isle of Man, these DTAs also underline a shared commitment to meeting international standards and cooperating at an industry and a political level. The message is a powerful one and should positively impact the reputation of the Crown Dependencies on the international stage and consequently Jersey’s attraction to investors.”

The development means that Jersey has now signed seven DTAs as well as 29 Tax Information Exchange Agreements (TIEAs).

ICSA: New guidance to help non-executive directors 'stay out of jail'

A new guidance note published today by the Institute of Chartered Secretaries and Administrators (ICSA) is designed to help non-executive directors avoid a range of penalties – from fines, through to disqualification and imprisonment – if they fail to carry out their various duties.  

Focusing particularly on the duty to exercise reasonable care, skill and diligence, the guidance note covers such issues as:

• Taking responsibility for their own on-going training and continuous development;
• Being prepared to provide independent oversight and constructive challenge;
• Insisting on receiving high-quality information;
• Making decisions objectively in the interests of the company and
• Avoiding conflicts of interest

Prospective non-executives are also advised to undertake their own due diligence before taking on the role, satisfying themselves that the company is one in which they can have confidence, and can make a strong and value added contribution.

Seamus Gillen, ICSA’s Policy Director said:

‘Becoming a director confers many privileges – of power, influence and status.  But the position also carries great responsibilities.  No director wants to make the kind of mistake that sees them lose their house, or their reputation, and even less face legal action. This new guidance directly addresses a question we are often asked – what do we need to do to stay out of jail?  It will help directors conduct themselves in a way which avoids lasting damage both to themselves and their company’

The Global Forum on Tax Transparency welcomes Romania as new member

Romania has joined the Global Forum on Transparency and Exchange of Information for Tax Purposes. As the 118th member of the Global Forum, it will participate in the peer review process which encourages all countries to adopt effective exchange of information in tax matters. 

“We are delighted to welcome Romania as a new Global Forum member”, said OECD Secretary-General Angel Gurría “Romania will now be among the jurisdictions that are directly involved in the international effort to make tax systems worldwide transparent and fair to all, and I look forward to strengthening our mutual cooperation in this important field.”

The Global Forum’s aim is to ensure that all jurisdictions adhere to the same high standard of international cooperation in tax matters and governments come together to fight and prevent tax evasion. Membership of the Global Forum keeps growing - a clear indication of the value of its work to countries worldwide.   

Consistently supported by G-20 leaders, since 2010 the Global Forum has published 88 peer review reports containing 616 recommendations to help jurisdictions improve their cooperation in tax matters. As a result, more than half of the countries reviewed have already introduced or proposed changes to their laws.