Africa is a continent with important sum of minerals and agricultural resources and should be viewed as a market offering immense potential.16
After 2000, more investors were acute to fund undertakings non merely in India and Asia but besides in Africa through Mauritius and Seychelles. To prolong its dynamic growing, China and India need to lock in significant degree of energy and other natural resources from Africa. Harmonizing to the World Bank study, it was found that China are interested non merely with oil but besides non-petroleum merchandises viz. wood, Cu and diamonds and most late besides in Afro-produced value-added goods such as processed nutrients and household consumer goods, with China in a position to counter US and European quotas on Chinese fabric with the low-priced consumer African market.17 On the other manus, the fact that Indian immigrants from parts of Africa have concern ties to India and a all right cognition of Africa has contributed to pull investing to Africa. Indeed, India has significant foreign modesty and the authorization waived the regulations and limitations, allowing entities to travel overseas and taking out the $ 100 million cap on foreign investing by Indian firms.17
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Mauritius and Seychelles combine the conventional benefits of active offshore fiscal legal powers in the Indian Ocean with cardinal advantage of being treaty-based Centres, with broad scope of Double Taxation Avoidance Agreement.
184.108.40.206 THE CHOICE OF MAURITIUS FOR INVESTMENT
Mauritius is rapidly transforming into a cardinal Centre for offshore banking largely in Africa, with more than 400 fiscal establishments already settled here – hiking up assurance of investors.18
Mauritius ‘ legal power has taken a measure farther on other legal powers by winning a series of awards:
The easiest topographic point to make concern in Africa by The World Bank Doing Business 2009.
Most improved investing clime Award 2009.
Mercer Survey – Quality of Populating 2010 qualifies Port-Louis in Mauritius as the best regional metropoliss of Africa with the best quality life.
Climate Protection Award for its attempts to cut downing nursery consequence.
The Economist Intelligence Unit ‘s Index of Democracy 2008
‘Most attractive ‘ seaward finish: The A.T Kearney ‘s Global Services Location Index topographic points Mauritius in the Top 25 universe ‘s most attractive finish.
Harvard University ‘s Ibrahim Index of African Governance: Has declared Mauritius the best run authorities out of 48 African states
The OECD has placed Mauritius on their white list of Financial Services centres.
Advantages for puting up and administering investing vehicles in Mauritius:
Location and Time Zone
Mauritius is ideally located between the South Atlantic Ocean and the Indian Ocean and holding the benefit of being portion of Africa but non being Continental African states. Spillover effects from possible neighbouring struggles are eliminated from this ideal geopolitical location17. The clip zone of Mauritius is convenient for easiness of concern as it is positioned in such a manner that it is 4 hours in forepart of the UK and 4 hours behind Asia18.
Political and Economic Stability
The authorities ‘s progressive concern and investing policy steps in the recent old ages were effectual to cut down the impact of the recession to the economic system. Indeed, Mauritius, being one of the really few states to accomplish positive GDP during the crisis, maintains a GDP growing of 5-6 % per annum18. Furthermore, the authorities are implementing economic reform policies such as attractive revenue enhancement inducements for concern and investors that are reenforcing the state ‘s place as a major investing and fiscal centre21.
The Legal System of Mauritius combines both the English Common Law and French Civil Law. Having set a mark to equilibrate adequately between the protecting investors, the market shapers ‘ involvement and the market participants and the overall fiscal system, Mauritius has set list of statute law impacting offshore and non-resident concern. These include: Companies Act 2001, Financial Services Development ( Amendment ) Act 2005, Financial Intelligence and Anti-Money Laundering Act 2002, Financial Services Development Act 2001, Finance Act 1996, Freeport Act 1992, Merchant Shipping Act 1986, Securities Act 2005, Stock Exchange Act 1988 and the Trust Act 2001.22
Double Tax Treaties and No Exchange Control
Mauritius has 35 dual revenue enhancement pacts among which 13 are from African states which includes Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, Republic of South Africa, Swaziland, Tunisia, Uganda and Zimbabwe and a few ( Malawi, Nigeria and Zambia ) are expecting confirmation. Furthermore, more pacts are being discussed with Burkina Faso, Egypt, Ghana and Algeria.
Capital additions revenue enhancements, where charged in Africa, are usually levied at a rate changing between 30 per centum and 35 per centum. Nevertheless, the Mauritius Double Tax Treaties limits taxing rights of capital additions to the state of abode of the marketer of the assets19. The benefit of no capital additions revenue enhancements and no exchange control in Mauritius, Investors make usage of a Mauritius occupant company to do the most of the current Low Tax Legislation20.
Furthermore, Mauritius has signed Investment and Promotion and Protection Agreements ( IPPAs ) with 15 African states. IPPAs give protection against free repatriation of investing and returns ; confidence against expropriation ; arrogation by authorities and besides promote publicity between member states17.
Mauritius has a pool of bilingual ( English and Gallic speech production ) brilliant professionals, with the bulk qualified from establishments recognised internationally or universe category professional organic structures. Furthermore the authorization ratified statute laws to carry immature foreign professionals to put up in the island25. The grownup literacy rate of Mauritius is among the highest in Africa, with 22 kids per primary school teacher26. The regulative model of Mauritius is English-based ; doing any foreign investor feels really comfy whenever he is making concern in Mauritius because it is easier to grok the regulative system of Mauritius21.
The authorization has made itself a committedness to indue the state with an efficient, dependable and supportive substructure to fit those available in developed states. There is presently monolithic work being done to bit by bit upgrade the overall substructure.
Entree to Markets
A member of the major African regional administrations advancing and easing trades among the African states, Mauritius has secured discriminatory entree to market valued at several 100s of 1000000s of consumers. Mauritius is a member of SADC ( Southern African Development Community ) , COMESA ( common market for Eastern and Southern Africa ) , the Indian Ocean RIM Association of Regional Co-operation and under the AGOA ( US AFRICA GROWTH AND OPPORTUNITY ACT ) have entree to certain responsibility free merchandises to the US markets.
Mauritius rank in these regional administrations can do the state become one of the best offshore fiscal service Centres.
The Global Board of Trade Ltd ( GBOT ) opens in Mauritius28
GBOT is a planetary multi-asset exchange situated in Mauritius, supplying the service of an electronic base with efficient glade and colony systems to procure counterparty warrant for all trades. The trade good and currency derived functions traded includes cherished and metal base, energy, “ soft ” agricultural trade goods and besides currency derived functions get downing with six currencies on its electronic exchange platform. GBOT indicated that there are programs for spread outing the scope of trade goods traded.
The induction of GBOT will be a cardinal development in reexamining Africa ‘s trade good and currency derived functions scenery. This latest exchange platform will be instrumental in unifying the split African fiscal markets and in linking the universe to Africa and the African possibilities to the universe and to its ain state.
All the above features of Mauritius ‘ offshore sector show that Mauritius has the proper ingredient to thrive and develop its offshore sector in the extroverted old ages. The launch of the GBOT is a major measure for Mauritius in doing their presence count as one of the taking seaward legal power to do investing.
Following the analysis on the Mauritanian offshore sector, it can be deduced that the sector is solid and profitable. The IMF stated that Mauritius did non exert any “ sub-prime loaning ” and this was one of the chief grounds why the authorization did non hold to step in to protect Bankss from failure. However, based on our empirical findings, revenue enhancement rates do non impact or otherwise really ill on the degree of investings comparative to GDP. The authorities however keeps the degree of revenue enhancements low.
The literature on revenue enhancements offers some penetrations on the revenue enhancement base and DTT. For case Wolman ( 1996 ) suggests that the protection of the revenue enhancement base is a primary ground for economic development activities. Pagano and Bowman ( 1995 ) are of the position that revenue enhancement interruptions and subsidies are offered by in fiscal matters healthy metropoliss so as to keep their image. However the context is different for developing states such as Mauritius. Christensen and Kapoor ( 2004 ) point out that those authoritiess are “ under immense lobbying force per unit area, peculiarly from concern consulting houses, to offer revenue enhancement inducements in order to pull investing. ”
First, by exposing a generous revenue enhancement government, Mauritius is giving a strong signal that the state is willing to pull investing and investors appreciate the attempt. As we have seen antecedently, the offshore sector is extremely profitable and contributes massively to GDP. Indeed this can be due to the discriminatory revenue enhancement intervention that Mauritius offers. The authorization may happen the levying of advantageous revenue enhancements as a possible agency to increase employment in the state and pulling influxs of capital and detering escapes of resources, even if these agencies are about uneffective. Tax competition hence becomes an agent of productiveness for the authorities ( Gurtner & A ; Christensen 2008 ) .
Mauritius is considered to be among the most competitory and successful economic systems in Africa and actively seeks foreign investing. The revenue enhancement pact web of Mauritius, coupled with its domestic low revenue enhancement system put frontward chances for an appropriate revenue enhancement planning permitted under the jurisprudence. Capital additions and investing income derived from the states with which the DTTs are signed are either non taxed or taxed at a decreased rate.
Through the analysis, it was observed that DTTs do impact the economic system ‘s net FDI. The state ‘s FDI influx exceeds its outflow significantly therefore taking to a notable positive Net FDI. It is besides noticed that, states that are the major beginnings of FDI in Mauritius are those holding DTTs with it. However, it can farther be perceived that besides, there are states non holding DTT with the state puting in the state. For illustration, the U.S has been the largest beginning of FDI for Mauritius in 2006 despite the fact that it does non hold revenue enhancement pact with the latter. In fact, it is the influxs from many of the states holding the pacts itself which fell well in 2006.
Based on the analysis, it was besides observed that DTTs were being misused in order to hedge revenue enhancement. It was reported that the India ‘s pact with Mauritius is doing a revenue enhancement loss of about Rs. 2,000 crore per annum to India. India has passed the Direct Tax Code to rectify to this state of affairs, nevertheless there was loopholes found in the Direct Tax Code that could finally impact its intended usage. After analyzing the instances of Vodafone and Indian Premier League ( IPL ) , it can be concluded that Mauritanian Jurisdiction was being used for revenue enhancement equivocation, round-tripping of money and maintaining the information of registered companies concealed.
The hereafter of the Mauritian offshore sector seems to be bright, particularly as Mauritius sets to move as a gateway to Afro Asian trade. The benefits of holding DTTs with 13 states in Africa, being a member of COMESA, SADC and AGOA and the gap of the Global Board of Trade Ltd ( GBOT ) have made Mauritius the ideal platform through which investings can be made to Africa.
It is believed that DTTs surely affects FDI but it is non ever the instance, that is, it is non the lone factor adding to the state ‘s FDI flow. There are certain instances where factors like market size, cost of local labor, good substructure, political and economic stableness, and legal and regulative model are of first considerations for investors. In the sentiment of Zahir Shah ( 2003 ) , financial inducements like the DTTs are most suited in pulling FDI because they have no direct reverberation on public resources. But in contrast to this sentiment, Louie and Rousslang ( 2002 ) , good administration attracts both FDI and revenue enhancement pacts, but the pacts entirely have no consequence on FDI.