Explore how the Mauritius International Financial Centre (IFC) can adapt to the fast evolving international tax landscape. This was the central theme of the 2017 Tax Conversation organised by KPMG in Mauritius on Wednesday 17 May at Hennessy Park Hotel, Ebene. 80 guests mainly from the financial sector, were present for this highly interactive event.
The event featured a panel of local and international experts in tax namely: John Riva, Senior Tax Partner, KPMG in the Channel Islands & Head of Tax, KPMG Islands Group, Girish Vanvari, Partner, National Head of Tax, KPMG in India, Wasoudeo Balloo, Partner, Head of Tax, KPMG in Mauritius and Mario Hannelas, Director, Large Taxpayer Department, Mauritius Revenue Authority (MRA).
John Chung, Managing Partner, KPMG declared in his welcome speech that:
“The next couple of years will be key to determining what role Mauritius continues to play for investments in and out of India. In parallel, our diversification strategy is well under way. It is a fact though that this strategy route is not going to be plain sailing. Our Global Business sector is going to be subject to further changes in the near future. Already, there are proposals to revisit and to replace the actual system of deemed tax credit…”
He further added that “Mauritius needs to continue to be a credible and substantive international financial centre. We know that the Mauritius model of development is based on a substantive and transparent one. Mauritius is a tested, proven and fully collaborative jurisdiction that adheres to international norms, standards and best practices…We have to earn international recognition for this, and for that we need to be benchmarked against other jurisdictions.” He ended by stating that “KPMG will continue to be an active participant in consolidating our jurisdiction”.
Wasoudeo Balloo, Partner, Head of Tax, made a presentation on the key challenges currently facing the Mauritius IFC
— Base Erosion and Profit Shifting (BEPS)
Wasoudeo explained that BEPS refers to strategies adopted by some multinational enterprises (“MNEs”) to exploit loopholes in tax rules of jurisdictions worldwide, with the sole aim of shifting profits to low or no-tax locations. The OECD BEPS project will influence the local laws, the ways we do business and even the environment in which we operate. There is pressing need for Mauritius to adapt to the global changes, thus ensuring that MNEs have sufficient economic substance justifying our taxing rights in Mauritius.
— EU List Of Non-Cooperative
Wasoudeo further stated that curbing tax evasion and avoidance have also been on the agenda of the EU Commission recently. With its three-step process, the EU Commission has taken the leap to come up with a list of non-cooperative jurisdictions, for countries which are not in compliance with international good tax practices and could possibly, directly or indirectly facilitate tax avoidance. A first list is expected to be published by the end of 2017.
Our concern will be mainly focused on adopting the right measures to ensure that Mauritius does not fall in the list of non-cooperative jurisdictions. The threats today are no other than preferential tax measures and harmful tax incentives like the deemed foreign tax credit has been helping us to flourish our global business sector.
— Automatic Exchange of Information(“AEOI”)
While the AEOI concept is no new, Wasoudeo drew attention to the upcoming implementation of the Common Reporting Standards (“CRS”) in Mauritius. He mentioned that the exchange of information among jurisdictions will enhance global transparency and cooperation. The objective of AEOI being to deter future non-compliance. This of course comes with major challenges – there is a need to have the appropriate legal framework, rigorous confidentiality and data protection safeguards and resources dedicated to ensuring the information received is put to effective use.
A year after the Mauritius India Protocol was signed, the after-effect will only be visible now with the end of the grand-fathered period and the swing into the transition period, which makes provision for the sharing of taxing right in India, subject to satisfying the Limitation of Benefits (“LOB”) clauses.
How Mauritius will maintain its position as an investment hub in the near future and beyond whilst being compelled to adopt stringent measures imposed by external forces is the big question to be focused on. The need to adapt to the changing environment is without a doubt the most challenging milestone.
Other uncertainties raised are with respect to the introduction of GAAR and the Place of Effective Management criteria in India. The underlying consequences could be that some companies in Mauritius could become tax residents in India. Undoubtedly, amendments brought to the Indian tax legislations will impact how we do business in Mauritius and could trigger changes to our own legislation.
The presentation was followed by a panel discussion which focused on the following areas:
— How the changes in the international tax landscape are impacting our global business sector
— Update on latest tax developments
— The role of IFCs going forward
— The way forward: how can Mauritius IFC continue to play an important role for structuring investment into India, Africa and beyond?
As a concluding remark, the panel highlighted that there should be consultative sessions together with the Government, the regulators and the private sector prior to finalisation of multilateral agreements.
There is also a pressing need to review our domestic tax regimes and tax treaties in order to be compliant with the requirements of the EU and the OECD; we have no other choice than to adapt to the evolving matters in the world of taxation. Stakeholders should instead turn those challenges into opportunities.
Emphasis was also laid on the opportunities that can be explored by investors. Mauritius has a financial sector which has evolved very positively and as such, we need to create an enabling environment which would encourage multinationals to provide substance in Mauritius.