The Expert Explains: How Mauritius ended up on EU’s international tax haven blacklist
Suddenly last month, Mauritius found itself in the limelight for all the wrong reasons as it featured on the EU blacklist for international tax havens. After the initial consternation, people are now beginning to scratch their heads and ask themselves:‘How did this happen?’ and, ‘What does it all mean?’So, here’s the explanation from our expert, Samantha Seewosurrun, a well-known professional consultant in the financial services sector.
Last month, out of nowhere, Mauritius found itself on an EU blacklist for international tax havens. Following the initial hue and cry, people are now beginning to question how this happened and, most importantly, what are its implications for the island economy, which is fast evolving as an international financial centre of repute for the larger Sub-Saharan African region.
For those looking at the bigger picture, here’s the explanation, straight from the desk of our expert guest contributor, Samantha Seewosurrun, a reputed professional consultant in the financial services sector:
On 17 June, the European Taxation Commissioner, Pierre Moscovici, launched a new EU Corporate Taxation Action Plan, where he announced that Mauritius was one of 30 countries described as ‘non-cooperative tax jurisdictions’, to the disbelief of both government and industry players in Mauritius.
How did this situation come about? In reality, the EU has long harboured ambitions to flex its muscles on tax policy, but progress in recent years has been limited. I spoke privately to some senior Directors in the EU’s taxation department in October 2014, who told me that the EU tax agenda was going nowhere.
Then, just weeks later, a new team of European Commissioners entered into office, including Pierre Moscovici, who was given responsibility for taxation. Pierre Moscovici was a former French Finance Minister who had been an ardent supporter of the G20 and OECD agenda on tackling tax avoidance and tax evasion, who now took up the reins with great enthusiasm.
So, how did Mauritius end up on the list? Some leading members of the European Parliament had been calling for an EU blacklist of tax havens for the last two years, and the EC was keen to capitalise on this.
In an arbitrary exercise, the European Commission (EC) looked at the national blacklists of EU Member States which had been discussed at the December 2014 Platform on Good Tax Governance, and decided to put any countries which were blacklisted by more than 10 of the 28 (so, not even a majority!) on the list. In the case of Mauritius, the Italian Government had actually removed Mauritius from its blacklist in April of this year, which meant that on 17 June there were only 9 countries which had Mauritius on their current blacklists and not 10.
Thus, the inclusion of Mauritius in the blacklist was actually based on outdated information. The Mauritian Government reacted strongly to this, as did the governments of Guernsey and Hong Kong, who claimed that the information presented was inaccurate and their inclusion was unjustified.
What next for the EU blacklist? The OECD is understood to have privately reacted with fury, since it was not consulted in advance of the announcement and it considers many of the countries on the list, including Mauritius, to be either compliant or largely compliant with OECD’s own standards. The EC’s rather unconvincing response has been to say that they did not ‘endorse’ the list as such but were simply compiling data from the EU Member States.
The future of the blacklist is an uncertain one. It seems likely that, sooner or later, Mauritius will get itself off the List. The tricky point may be how to achieve this in a way which avoids an embarrassing loss of face for Euro-bureaucrats.