Published in Mtimes 26 October 2018
Mauritius by signing the Multilateral
Convention on Mutual Administrative Assistance in Tax Matters was committed to implement
tax transparency and effective exchange of information, in particular under the
OECD/G20 Common Reporting Standard (CRS).
The CRS requires financial
institutions to automatically exchange information regarding their clients
to their clients’ local tax authorities. The Convention is seen to be the
“gold standard” measure for implementing the CRS, promoting tax cooperation and
key to the fight against global tax evasion and avoidance. 111 countries
have now signed up to the convention
The OECD has continued to put
pressure on a number of offshore and developing nations to ensure compliance
with the CRS, especially countries offering residence and citizenship by
investment (CBI/RBI) schemes. The OECD recently examined the structure of over
100 schemes offered by countries worldwide and concluded that “Identity Cards, residence permits and other
documentation obtained through CBI/RBI schemes can potentially be abused to
misrepresent an individual’s jurisdiction(s) of tax residence and to endanger
the proper operation of the CRS due diligence procedures.”
Mauritius’ CBI/RBI schemes were
identified as posing a high-risk to the integrity of the CRS, even though the
country is considered a CRS-committed jurisdiction. According to the OECD
report, potentially high-risk CBI/RBI schemes are those that give access to a
low personal tax rate on income from foreign financial assets and do not
require an individual to spend a significant amount of time in the jurisdiction
offering the scheme. Such schemes are currently operated by Antigua and
Barbuda, the Bahamas, Bahrain, Barbados, Colombia, Cyprus, Dominica, Grenada,
Malaysia, Malta, Mauritius, Monaco, Montserrat, Panama, Qatar, Saint Kitts and
Nevis, Saint Lucia, Seychelles, Turks and Caicos Islands, United Arab Emirates
and Vanuatu.
As a result of this tightening of the
CRS by the OECD to make it more effective, the consequences for the global business
industry in Mauritius will be quite adverse.
Some of our bi-lateral treaties that we chose to implement on a country by
country basis rather than the all-encompassing multi-lateral version will
equally receive short shrift from the OECD. Indeed, there are quite some
daunting challenges ahead for the financial sector which will be needing more
efforts from government than the two-day conferences and other piece-meal
approaches. This OECD report should be taken as a wake-up call and we should stop
playing our small games and be ready to play by the rules and accelerate the reforms
in the financial sector so as to succeed in gradually innovating and
transforming the Mauritius’ international financial centre by 2030.
