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AfricaMoney | June 29, 2017

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Will Mauritius benefit from new EU policy on tax havens?

Will Mauritius benefit from new EU policy on tax havens?

Today the 28 January, the European Commission adopted a new approach on ‘tax havens’ as part of a new “Tax Avoidance Package”. One element of the package is a new External Strategy for Effective Taxation, which seeks to deal with third countries like Mauritius, which in June 2015 had been included on an EU blacklist of ‘non-cooperative tax jurisdictions”. So will Mauritius benefit from the new approach? For those who wish to dig deeper, here’s the explanation, straight from the desk of our expert guest contributor, Samantha Seewoosurrun, a reputed professional consultant in the financial services sector.

Why was Mauritius on an EU tax ‘blacklist’ in the first place? Back in June 2015, the Commissioner Moscovici launched a Corporate Taxation Action Plan. He announced that Mauritius was one of 30 countries described as ‘non-cooperative tax jurisdictions’, which was strongly contested by government and industry players. Countries were included on the list of as ‘non-cooperative tax jurisdictions’ if more than 10 EU Member States – out of a total of 28, so not even half – had named them on their own national blacklist. Mauritius was listed by exactly 10 EU Member States.

What has happened, quietly, in the meantime, is that the number of countries which had included Mauritius on their national blacklist has declined. Italy had already removed Mauritius from its national list by April 2015 – even before the pan-EU list was announced – but the European Commission had used outdated information from December 2014 in compiling the list.

More recently, it has transpired that Estonia no longer considers Mauritius to be a tax haven, and very recently Latvia has taken the same view. This has now been confirmed – on an updated EU website launched on 28 January – which shows that Mauritius is only considered as a tax haven by 7 countries. Under the old rules, therefore, Mauritius would no longer be considered as a tax haven.

However, the matter is not entirely straightforward, since in launching a new approach on 28 January, Commissioner Moscovici has refrained from actually abolishing the pan-EU list of 2015 or saying that it is no longer valid. Politically, the European Commission has been seeking a face-saving way of downgrading the June 2015 list, which has been the subject of a huge amount of criticism from the jurisdictions named, not to mention from the OECD which had included Mauritius on its ‘White List’ of countries.

So what is the outcome of the announcements on 28 January? The European Commission has now set out a new ‘three step’ process to determine whether a country should be considered as a tax haven by the EU or not. The three steps are as follows:

·         Step 1: the European Commission will identify internally the third countries that should be prioritized for screening by the EU. The Commission will develop a scoreboard of indicators to determine the potential impact of jurisdictions on Member States’ tax bases, which will include financial importance, economic ties with the EU and institutional and legal factors [notably there is no reference to whether or not inclusion on the June 2015 pan-EU list is a relevant factor]. The first findings of the scoreboard will be presented to Member States in the Code of Conduct Group by autumn 2016.

·         Step 2: Member States should decide which jurisdictions should be assessed against the EU’s updated good governance criteria. This assessment phase will include a dialogue with the third countries in question, allowing them sufficient time to respond to any concerns that arise in relation to their tax regimes.

·         Step 3: Member States should decide whether to add the jurisdiction in question to a common EU list of problematic tax jurisdictions. Clear conditions for de-listing will also be set out for each jurisdiction added to the common EU list. Member States should mandate the Commission to immediately de-list a jurisdiction once the conditions are met.

There will be no apology from the European Commission for the fact that Mauritius was included on the June 2015 blacklist, based on outdated information, and reputational damage was clearly caused. Representatives of the Mauritian government and industry should move quickly to ensure that Mauritius is now recognised by the EU as a clean and transparent jurisdiction of substance, as it rightly deserves.

 

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