ActionAid warns Nigeria that Mauritius tax treaty could ‘hurt’ economy
ActionAid Nigeria (AAN), asked the Federal government to abstain from ratifying the tax treaty until all grey areas of the draft documents that could hurt the economy have been amended. (Image: ActionAid)
In what could prove to be a setback to Mauritius in cementing its position as a gateway to Africa, the government of Nigeria has been urged to think twice before ratifying its tax treaty with the island nation.
As the second largest economy of Sub-Saharan Africa, Nigeria commands a large flow of Foreign Direct Investments into the continent, and Mauritius, with its expertise in guiding global investors interested in making inroads into the growing economies in the region, is keen to partner with the booming West African economy.
However, at a one-day technical meeting to review the Nigeria-Mauritius Double Taxation Treaty last week, UK-based NGO ActionAid’s Nigeria chapter, ActionAid Nigeria (AAN), asked the Federal government to abstain from ratifying the tax treaty until all grey areas of the draft documents that could hurt the economy have been amended.
The recently signed Double Taxation Treaty (DTT) between Nigeria and Mauritius, covering beneficial tax rates for dividends, interest, royalties, resident-based taxation of capital gains and rules in respect of taxation of permanent establishments, is still awaiting ratification in Abuja.
In his opening remarks at the forum which had over 30 participants from the civil society organisations, CSOs, Economists, Public Policy Analysts, representatives from MDAs and the media, the Country Director of AAN, Dr Abdu Hussaini, said that despite the potential benefits of international treaties to national developmental efforts, the government should be wary in signing treaties in view of the likely hurtful impact on the economy.
He reasoned that, with the way the Federal Government signs all manners of treaties, like the one on double taxation with Mauritius, Nigeria’s drive for Foreign Direct Investment and need to derive maximum benefits from tax revenue may be in jeopardy as a result of “capital round tripping by multinational firms,” who are equally “treaty shopping,” looking for best tax havens for lower taxes or to evade taxes.
Hussaini noted in particular that the draft Mauritius-Nigeria DTT should be subjected to critical study and made to conform with international best practices like the United Nations OECD models before further action is taken on it.
“Mauritius has this kind of treaty with over 30 countries and many of these investors go on treaty shopping. Mauritius has a very good business environment and they (the investors) just go there and register, to go to bigger markets and use Mauritius as a base,” he observed.
“So, what I am questioning is the principle of the Mauritius-Nigeria DTT. Why do you want to have this type of treaty with Mauritius? Why not Brazil, why not India, why not China? Those are where the markets are and where you see the maximum benefits of such bilateral relationships. When you are not doing that? Why are you going to an island when the island itself does not have any parent company located on it?” he reasoned.
Also, Donald Ideh, who presented a paper titled “Review of Mauritius-Nigeria Double Taxation Treaty” by tax expert Taiwo Oyedele, said that one of the setbacks of DTTs is the allowance they create for tax evasion or treaty shopping.
Besides, AAN also urged the government not to sign the Economic Partnership Agreement (EPA) between the Economic Community of West African States (ECOWAS) and European Union (EU), details of which concluded and endorsed last week by a meeting of ministers of finance from West African countries.