Mauritian Finance Bill Worries Offshore Sector

by Lorys Charalambous, Tax-News.com, Cyprus

22 July 2002

In Mauritius, the body which represents the interests of the non-financial offshore sector, the Association of Offshore Management Companies (AOMC), is contesting parts of the Finance Bill 2002, now before the Legislative Assembly. The Bill implements measures announced in the June Budget Speech of Paul Raymond Bérenger, Deputy Prime Minister and Minister of Finance. Since the Government has a large majority in the Assembly, its Bill will pass unless it chooses to amend it.

The AOMC is mostly concerned about wording which would allow the Financial Services Commission (FSC - the successor to the old MOBAA) to enter information exchange agreements with foreign countries, and gives it powers to requisition information from management companies about their clients.

The Bill stipulates that the FSC may “enter into an agreement or arrangement for the exchange of information with a foreign supervisory institution having responsibility to supervise financial institutions and the conduct of financial markets and the provision of financial services, where the Commission is satisfied that the foreign supervisory institution has the obligation to protect the confidentiality of the information so imparted.”

The Bill also includes amendments to the Financial Services Development Act 2001 (FSDA) authorising the FSC in the discharge of its functions in respect of the non-bank financial services sector to require management companies to furnish information relating to their business or to any business administered/managed by them for a client. The FSC is specifically empowered to publish and disseminate such information excluding those relating to the “individual affairs of any particular client” of a management company.

The AOMC is locked in intensive discussions with the FSC, the Financial Services Promotion Agency (FSPA) and the Ministry of Economic Development and Financial Services, saying that the measures should be be shelved pending a thorough report on the competitiveness of the Mauritian offshore sector compared to other jurisdictions.

Says Mr Sunil Banymandhub, president of AOMC: “We’re aware that the global trend requires that countries enter, along with others, into bilateral treaties for exchange of information, treaties which define the type of information and the institutions involved among other things. The problem is that several countries, including those considered as developed [eg Belgium,Luxembourg, Monaco,Switzerland etc] have yet to accept this principle expounded by the Organization for Economic Cooperation and Development (OECD). Mauritius bears the risk of finding itself in a unfavourable position compared to other jurisdictions.”

“The right approach would be to carry out a very thorough survey on what’s being done in Mauritius and elsewhere, particularly on those aspects that render a jurisdictiction more competitive” he added.

The AOMC says that around 90% of the offshore business is referred to Mauritian professionals by their foreign counterparts. They fear that the amendmends undermine the trust of these foreign professionals. However, the AOMC is aware that the government has no choice but to seek a balance. “We’re willing to sit round a table to review all the implications of the amendments and the details of the comparative survey to be begun as soon as possible”, says Mr Banymandhub.

The AOMC also says it is disappointed that the Government has not returned the 80% tax credit given to offshore companies on their foreign income to its original 90% level, arguing that the OECD has reconsidered its stance on harmful tax practices and no longer views a nil tax rate as necessarily harmful. “We believe that our request doesn’t imply a loss of revenue for the country. On the contrary, (it) will spur new investments and generate additional business’ Mr Sunil Banymandhub emphasized.

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