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Africa/Global: #MauritiusLeaks Reveals Tax Dodges
August 12, 2019 (2019-08-12)
(Reposted from sources cited below)
“Based on a cache of 200,000 confidential records from the
Mauritius office of the Bermuda-based offshore law firm Conyers
Dill & Pearman, the investigation reveals how a sophisticated
financial system based on the island is designed to divert tax
revenue from poor nations back to the coffers of Western
corporations and African oligarchs, with Mauritius getting a share.
The files date from the early 1990s to 2017.” - International
Consortium of Investigative Journalists
Despite involving at least two large U.S. companies with worldwide
interests, this new set of revelations from the group that broke the
Panama Papers in 2016 has had hardly any coverage in the United
States, with no mention to date in the New York Times, Washington
Post, or Wall Street Journal. Worldwide it has apparently had significant coverage primarily
in East Africa and India. But it is a significant case study in
how the international tax avoidance system works, particularly with
reference to Africa. AfricaFocus Bulletin is accordingly publishing
two Bulletins today, one capsulizing the news from ICIJ, and the
other looking more deeply at the policy implications, including a
profile of Aircastle, based in Stamford, Connecticut, a leading
provider of leased airplanes to airlines around the world.
This AfricaFocus Bulletin contains excerpts from the principal
article launching the reporting on the Mauritius Links
Other articles published to date include a profile of the law firm
involved, a case study of an
American-owned company specializing in luxury vacation resorts and
hotels around the world, and a report on the reaction to the investigation in a number of
the countries involved.
The other AfricaFocus sent out today, available on the web at
http://www.africafocus.org/docs19/iff1908b.php, and entitled
"Tax Avoidance 101," includes brief background on the
investigation, a profile of Aircastle compiled by AfricaFocus based
on material from ICIJ and Quartz as well as additional research,
and a summary by Tax Justice Network of the significance of the
Mauritius material for global action to counter tax avoidance.
For previous AfricaFocus Bulletins on tax justice and illicit
financial flows, visit
Break from Publication
Note to readers: AfricaFocus Bulletin will be taking a break from
publication for a few weeks, resuming in early to mid-September.
The AfricaFocus website and Facebook pages will continue to be
updated during the break.
++++++++++++++++++++++end editor's note+++++++++++++++++
International Consortium of Investigative Journalists
July 23, 2019
[Excerpts only. For full story and many related resources, visit
Bob Geldof’s firm wanted to buy a chicken farm in Uganda, one of
the poorest countries on earth. But first, an errand.
After soaring to fame in the 1980s for organizing Live Aid and other anti-famine
efforts, the former Boomtown Rats rocker had shifted to the high-
powered world of international finance. He founded a U.K.-based
private equity firm that aimed to generate a 20% return by buying
stakes in African businesses, according to a memorandum from an
The fund’s investments would all be on the African continent. Yet
its London-based legal advisers asked that one of its headquarters
be set up more than 2,000 miles away on Mauritius, according to a
new trove of leaked documents.
The tiny Indian Ocean island has become a destination for the rich
and powerful to avoid taxes with discretion and a financial
powerhouse in its own right.
One of the discussion points in the firm’s decision: “tax reasons,”
according to the email sent from London lawyers to Mauritius.
Geldof’s investment firm won Mauritius government approval to take
advantage of obscure international agreements that allow companies
to pay rock-bottom tax rates on the island tax haven and less to
the desperately poor African nations where the companies do
“One little wad of cash can be the difference between a poor
country building big infrastructure or not,” a Ugandan tax official
Another benefit of a headquarters on Mauritius: opacity.
Transactions to and from Mauritius to local units – that can have
huge impacts on tax liability – are tucked away in confidential
financial reports filed on the island.
The Mauritian newspaper L´Express was the key local partner in
this investigation by ICIJ. Credit: L´Express.
A spokesman for Geldof’s firm, 8 Miles LLP, said its investors
include international development finance institutions that
“request that we consolidate their funds in a safe African
financial jurisdiction for onward investment into the various
target African countries. Because of its reputation, Mauritius is
used by many private equity investors for this purpose.”
The spokesman said the firm’s African investments follow high
standards “to create jobs, improve communities…and by generating
increasing tax revenues which support the governments where we
operate.” The spokesman said, “Only when we sell a company will
the sale proceeds be paid back into the fund in Mauritius.”
Geldof declined to comment.
Mauritius Leaks, a new investigation by the International Consortium of Investigative
Journalists and 54 journalists from 18 countries,
provides an inside look at how the former French colony has
transformed itself into a thriving financial center, at least
partly at the expense of its African neighbors and other less-
developed countries. In Uganda, more than 40% of the population
lives on less than $2 a day.
Based on a cache of 200,000 confidential records from the Mauritius
office of the Bermuda-based offshore law firm Conyers Dill &
Pearman, the investigation reveals how a sophisticated financial
system based on the island is designed to divert tax revenue from
poor nations back to the coffers of Western corporations and
African oligarchs, with Mauritius getting a share. The files date
from the early 1990s to 2017.
The island, which sells itself as a “gateway” for corporations to the
developing world, has two main selling points: bargain-basement tax
rates and, crucially, a battery of “tax treaties” with 46 mostly
poorer countries. Pushed by Western financial institutions in the
1990s, the treaties have proved a boon for Western corporations,
their legal and financial advisers, and Mauritius itself — and a
disaster for most of the countries that are its treaty partners.
This map, from
research in 2017 by ActionAid, shows countries in Africa
and Asia that have signed very restrictive tax treaties with other
countries such as Mauritius, limiting their ability to tax
corporations based in the partner countries.
“What Mauritius is providing is not a gateway but a getaway car for
unscrupulous corporations dodging their tax obligations,” said
Alvin Mosioma, executive director of the nonprofit Tax Justice
The leaked records – including emails, contracts, meeting notes and
audio recordings – provide a glimpse inside a busy offshore law
firm working with global accounting and advisory firms for some of
the world’s largest corporations and some very wealthy individuals.
They’ve all found their way to an island built on helping the rich
avoid paying taxes to nations as far-flung as the United States,
Thailand, and Oman.
Mauritius’ minister of financial services of good governance
Dharmendar Sesungkur, who oversees the country’s offshore sector,
said that ICIJ’s
information was “outdated.” The minister said that independent
organizations, including the World Bank, recognize that “Mauritius
is a cooperative and clean jurisdiction that has made significant
progress in adhering to international standards.” [Read the
Government of Mauritius’ full response]
Mauritius has introduced “major policy (as well as legislative)
changes,” Sesungkur said. Prime Minister Pravind K Jugnauth
recently announced tighter rules for companies that want to benefit
from the island’s low tax rates; such companies must have greater
control and activity in Mauritius and more skilled employees.
From sugarcane to shell companies
A longtime possession of the Dutch, French and then the British,
Mauritius was for centuries a poor agrarian society with an economy
based mostly on sugarcane. Its economic prospects seemed forever
limited by its location, 1,250 miles east of the African coast, and
tiny size, smaller than Rhode Island.
Then in the early 1990s, Rama Sithanen pushed an idea.
The Mauritius finance minister at the time, Sithanen observed that
Luxembourg, Switzerland, Hong Kong and other, more obscure
jurisdictions had grown into financial powerhouses by serving as
low-tax gateways to wealthy nations nearby. He said Mauritius
should do something similar, offering itself as a stable,
corruption-free bridge to Africa and other less developed regions.
“The potential exists to explore new avenues and to look for new
markets,” he argued before the Mauritius Parliament in 1992,
pushing a bill that would make possible the island’s first shell
companies and allow some firms to pay zero taxes on profits and
capital gains. One parliamentary colleague called the bill “a
wonderful tax tool.”
An opposition member objected, saying the bill would create at
least the appearance that Mauritius was benefiting at the expense
of poorer neighbors.
“It is a tough world,” retorted another government minister in
support of the law. “We cannot waste time.”
Within weeks of the bill’s passage, Mauritius officials were off on
marketing trips to Asia. In the law’s first year, 10 offshore
companies incorporated in Mauritius. Two years later, that number
had passed 2,400.
Tax treaties proliferate
A key part of the island’s strategy: tax treaties, lots of them.
Starting back in the 1920s, “double taxation agreements” were
adopted to protect businesses with international operations from
being taxed twice for the same transaction. Two nations simply
agreed on dividing one set of taxes between them. To encourage
investment, tax treaties also limited the tax rate governments
could apply to certain cross-border transactions.
Tax treaties surged as global trade blossomed after World War II; a
second wave came during decolonizations in the 1960s and 1970s.
Under the umbrella of the Western-dominated Organization for Economic Cooperation and
Development, richer countries pushed for treaties that
awarded most of the tax revenue to themselves, not the poorer
countries where the business activity took place.
Officials in some developing countries sensed early on that the
system was tilted against them. Among their complaints: Western
companies were shifting income out of developing countries by
inflating “expenses” and “fees” paid to the home office, reducing
local taxable income. “They have taken out of Zambia every ngwee
[penny]” owed in taxes, Zambian President Kenneth Kaunda fumed
Developing countries believed they had to enter into treaties to
attract foreign investment, even if it meant signing away tax
revenue that could fund education, health care and other vital
Aid from poor to rich
By 1974, an academic paper was already warning that the treaties in effect represented “aid
in reverse – from poor to rich countries.”
Nonetheless, the number of treaties surged again in the 1990s as
Western corporations and their advocates within international
institutions pushed them as a requirement for attracting foreign
investment. Meanwhile, tax havens, seeing an opportunity, dropped
their tax rates, encouraged corporations to set up shell
“headquarters” in their countries, and promoted tax treaties as a
way to avoid paying taxes.
For Mauritius, a big breakthrough came in the early 1990s when an
enterprising lawyer in Mumbai discovered that a then-dormant 1982
India-Mauritius tax treaty would allow his Western clients to avoid
paying taxes in both the United States and India. Western money
poured into the newly liberalized Indian market – after first
passing through Mauritius.
“Success has many fathers,” said the lawyer, Nishith Desai, in an
interview with ICIJ. “People didn’t even know where Mauritius was
located. People mixed things up between Mauritius, Maldives, Malta
. . . a lot of small islands starting with the letter ‘M.’ ”
Gushing press releases and news articles suggested that Mauritius
was on a path to becoming the Hong Kong or Singapore of the Indian
Ocean. “We avoid stacks of tax,” one fund manager told Toronto’s
Financial Post in 1994.
Mauritius introduced a flat corporate income tax rate of 15% with
foreign tax credits that can drive that down to an effective rate
of 3%. Mauritius rolled out Global Business Licence 1, which
allows companies with operations elsewhere to be “resident” in
Mauritius for tax purposes and pay its low rates. It went on to
sign dozens of tax treaties with countries around the world,
including 15 in sub-Saharan
Poorer countries push back
Some countries have tried fighting back – but it’s not easy.
Renegotiations can take years. Political leaders often seek to
avoid the diplomatic fallout.
South Africa signed a new treaty with Mauritius, which first
ignored South Africa’s requests to modify the 1997 text and then
resisted for years, according to people involved. Western
corporations lobbied the South African parliament to reject the
renegotiation and threatened to move their offshore operations to
Dubai. The new treaty took effect in 2015.
“The old treaty basically gave the store away,” said Lutando Mvovo,
a former South African treasury official who took part in the
Successive Indian governments for years challenged the legality of
the Mauritius 1982 treaty. And they kept losing. In a landmark 2012
case, India’s Supreme Court held that the tax office could not
question U.K. telecom giant Vodafone’s $11 billion acquisition of
an Indian rival through a Mauritius company. The decision cost
India $2.2 billion in lost tax revenue.
It took 20 rounds of negotiations over 20 years for India to prod
Mauritius in 2016 to remove the abusive provisions of the original
1982 treaty, one Indian official told ICIJ.
In separate interviews with ICIJ, tax officials in Egypt, Senegal,
Uganda, Lesotho, South Africa, Zimbabwe, Thailand, India, Tunisia
and Zambia all said their treaties with Mauritius were crippling.
“Personally, we regret signing the treaty,” said Setsoto Ranthocha,
an official with the Lesotho Revenue Authority, now involved in a
renegotiation effort. Lesotho’s treaty with Mauritius dates to
“The companies are the winners,” Ranthocha said. “It makes me go
Namibia is reviewing its treaty with Mauritius, officials told ICIJ
partner The Namibian. In March, Kenya’s high court struck down that
country’s treaty with Mauritius for technical reasons. Tax Justice
Network Africa filed the complaint, arguing that the treaty would
allow companies to abusively “siphon” money out of Kenya. In June,
Senegal announced that it would seek to cancel its tax treaty with Mauritius, claiming that
the agreement cost it $257 million over 17 years.
“It is the most unequal treaty for Senegal of all the treaties we
have signed,” Magueye Boye, a tax inspector and Senegal’s lead
treaty negotiator, told ICIJ. It is an “enormous pipeline for tax
avoidance,” he said.
Another country reviewing its treaty with Mauritius is Uganda.
‘No nefarious agenda’
Mauritius’ tax benefits are popular with African elites as well as
Patrick Bitature owns telecommunications, energy, media and hotel
companies across Uganda. One of Uganda’s richest men, who once sat
on the boards of one-third of the companies on the Kampala Stock
Exchange, Bitature has been close to Uganda’s authoritarian
president, Yoweri Museveni, according to The Indian Ocean
Newsletter, a respected news outlet.
He is also majority owner of Electro-Maxx, which runs Uganda’s
largest thermal power plant, located in the eastern town of Tororo.
It is the first African-owned and financed company to produce power
on the continent.
In 2011, the investment company African Frontier Capital LLC
proposed a $17.5 million investment in Electro-Maxx that passed
through a newly incorporated Mauritius company named African
Frontier I LLC, according to minutes of the African Frontier board. The proposal included a $2.5 million personal loan to
Bitature, the minutes say.
The company’s minutes, dated June 2011, also said it would apply
for a tax residency certificate every year to “benefit” from the
tax treaty between Uganda and Mauritius.
Robert Mwanyumba, a tax researcher focused on East Africa, said
that if the company used the treaty with Mauritius, it would have
been subject to its low corporate income tax rate instead of
Uganda’s 30% rate.
Bitature confirmed the existence of a “bona fide” transaction and
said the use of a tax treaty was a question for African Frontier,
which did not provide a comment on the subject.
Responding to ICIJ media partner The Daily Monitor, Bitature said
that Electro-Maxx sought external financing when it could not raise
money for a new project. “The transaction was carried out within
the provisions of the tax laws and fully accounted for in tax
returns shared with” the Uganda Revenue Authority, he said.
“All taxes if any” were paid, Bitature said, adding “there was
absolutely no nefarious agenda.”
African Frontier Capital, via the Mauritius company African
Frontier I, ended its investment in Electro-Maxx in 2014. It told
ICIJ that the investment was “a completely arms-length transaction”
that fully complied with the laws of the countries involved.
In January , after years of complaints from its treaty
partners and under pressure from international institutions,
Mauritius overhauled the tax laws governing its offshore sector.
Gone is Global Business License 1, the form of shell company that
poorer nations denounced as an exploitative tax-avoidance tool.
Mauritius now requires investors to have reasonable local staffing
and to spend money on the island that reflects the activities of a
real office – known as “enhanced substance” – to benefit from tax
treaties or low tax rates. Shell companies are a thing of the past,
Mauritius assures outsiders.
Bemoaning the new rules, one member of Parliament blamed the Panama
Papers and Paradise
Papers investigations by ICIJ, among other
exposés, for soiling the offshore industry’s reputation. “Under
pressure from the OECD and the European Union, who have at heart
only their interest to further tax their citizens and corporations,
Mauritius, once again, has kowtowed,” lawmaker Mohammad Reza Cassam
Corporations, fund managers and tax advisers warned the changes
would make Mauritius less attractive for investment.
Others, however, suggest that its reforms may be little more than
box-checking designed to keep the country off international
blacklists. Mauritius, they say, has already found ways to continue
providing tax-avoidance opportunities.
The island reluctantly agreed, for example, to a rule that allows a
Mauritius treaty partner to deny tax-treaty benefits to a
multinational corporation that opens in Mauritius with the
“principal purpose” of exploiting those benefits. Experts say that
poorer countries will rarely be able to make use of that provision:
Denying treaty benefits to a corporation will require technical,
financial and political resources that a developing country may not
Sol Picciotto, emeritus professor at Lancaster University law
school in England, said of Mauritius: “They play the game so as not
to be denounced as uncooperative, but they can maneuver within the
grey areas of the rules. They can say they’re doing it by the book,
but the book is full of technical tricks, and Mauritius has some
very skilled technicians.”
This year, Setsoto Ranthocha, the Lesotho tax official, negotiated
with Mauritius to fix a treaty that he says has cost his country
dearly. “They are tough negotiators,” Ranthocha said of his
Mauritius counterparts. “They know what they are doing.”
Meanwhile, Mauritius is pursuing new treaties with 16 African
states, bidding to bring its coverage to nearly 60% of the
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