Much ado about Mauritius Leaks?

Kenyan President Uhuru Kenyatta with Mauritian Prime Minister Pravind Kumar Jugnauth in Port Louis in April. Kenyan signed a double taxation agreement with Mauritius. FILE PHOTO | NMG 

In Summary

• Mauritius is being accused of undermining development in Africa.
• “Mauritius Leaks,” details how laws in the country help corporations avoid taxes.
• According to the ICIJ, many foreign companies are rushing to register in Mauritius because the country allows them to transfer money in and out of Africa without incurring much taxes

By JAMES ANYANZWA
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By BOB KARASHANI
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Mauritius siphons tax from poor nations to benefit elites,” wrote the International Consortium of Investigative Journalists (ICIJ)—that also gave us the Panama and Paradise Papers—in their latest round of leaks last week. Some 54 reporters from 18 countries around the world were involved.

Their report, “Mauritius Leaks,” details how laws in the country help corporations avoid taxes. One of the most prominent is 8 Miles, an investment firm run by former pop star Bob Geldof.

The firm, which invests in African start-ups, began setting up subsidiaries in Mauritius, “an offshore jurisdiction with a wide network of double taxation treaties in interesting markets.”

Mauritius is being accused of undermining development in Africa. But it is the declining interest in leaks about “tax planning” by individuals and corporations that caught the interest of observers.

While the 2016 Panama Papers led to public outrage, its successor Paradise Papers generated just a buzz. A leak last year on West Africa barely registered.
The report highlights the problem of “tax planning”: It may be unethical, but not illegal.

Several East African companies were featured in the report for routing cash to the tax haven of Mauritius, taking advantage of the Mauritian tax code to profit at the expense of their governments.
According to the ICIJ, many foreign companies are rushing to register in Mauritius because the country allows them to transfer money in and out of Africa without incurring much taxes.

It is estimated that poorer countries lose up to $100 billion ever year due to tax agreements with offshore jurisdictions such as Mauritius.

In addition, multinationals shifting profits to tax havens are costing world governments more than $500 billion per year.

Subsidiaries in Mauritius

According to the report, several Kenyan companies, some linked to senior government officials, rushed to register and set up subsidiaries in Mauritius after the two countries signed a double taxation agreement in May 2012, to evade paying taxes to the Kenyan government.

Earlier this year, the agreement was nullified by the High Court, only to be reinstated after intense lobbying by government officials. The new agreement is yet to be ratified.

According to the Leaks, Kenyan oil and gas companies registered in Mauritius in 2012. They include one linked to a minister and another associated with a bank board member.

The companies were registered in Mauritius after May 12, 2012, when the Kenyan and Mauritian governments signed the DTA.

A Tanzanian firm is accused upfront of “restructuring” its ownership in 2015 by opening an affiliate company in Mauritius.

A planning brief by consultancy firm KPMG attached to the Mauritius Leaks findings explains that the plan was for the parent company in Mauritius to provide a “loan” to the Tanzanian subsidiary in such a way that any money used to repay the loan would be taxed at only three per cent in Mauritius rather than 30 per cent in Tanzania, as per the two countries’ respective tax laws.

Tanzania does not yet have double taxation agreements with Mauritius; the agreement is reportedly still at the early stages of negotiation.

In Dar es Salaam, Tanzania Revenue Authority spokesman Richard Kayombo told The EastAfrican that the agency’s tax investigations department intended to follow up on the matter after learning about it through media reports.

“We will not be commenting further at this time,” Mr Kayombo said.

Other Tanzanian companies are also featured in the report.

A prominent Ugandan businessman has also been featured in the report as having registered a special purpose vehicle in Mauritius to enjoy fiscal benefits such as reduced withholding tax on dividends, interests and royalties, and no capital gains tax.