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Moving Past the Mauritius Leaks

Posted on July 30, 2019

Now that investigators have released the Mauritius Leaks, what should happen next?

As with previous tax data leaks examples include the Panama Papers, Luxembourg Leaks, and Paradise Papers there’s considerable controversy regarding how the International Consortium of Investigative Journalists (ICIJ) obtained its information and what all of it means for Mauritius, a popular holding company jurisdiction colloquially known as the Singapore of Africa.

The story is straight out of a spy novel: The Mauritius Leaks project began when the ICIJ unexpectedly received an anonymous package that included a USB stick containing 200,000 files from the Mauritius office of offshore law firm Conyers Dill & Pearman. The ICIJ alleged that those files which date from the early 1990s to 2017  reveal a web of highly secretive strategies that Conyers employed on behalf of clients to route investments through the island nation, taking advantage of its robust tax treaty network and driving down their tax rates.

But the Mauritius government and other interested parties counter that the information on the USB drive may have been illegally obtained and, regardless, is old, cold news — and may even be outright false in some instances. To start, Bermuda-based Conyers no longer operates an office in Mauritius. Further, the country’s government has agreed to make several changes to its tax policies, including implementing the OECD’s multilateral instrument and its main anti-treaty-shopping measure the principal purpose test to maintain good standing with the international community. According to the government, the MLI covers 41 of the country’s 45 tax treaties. The authorities also contend that the ICIJ investigation misconstrues the important role that Mauritius plays in drawing foreign direct investment to the greater African continent.

In the wake of the leak, several civil society organizations including the Tax Justice Network and the European Network on Debt and Development have repeated their calls for the U.N. to establish an intergovernmental tax body to referee the increasingly chaotic discourse on international taxation and help establish transparent, inclusive global tax standards. This discussion seems to follow every data leak and then plateaus until the next major international tax development comes along.

Government responses to previous tax data leaks are likely to prove instructive in this case. The name of the game has been prosecutions, police raids, and tailored legislation targeting particular activities in the jurisdictions highlighted by the leaks.

In terms of Mauritius, Kenya has a head start on this movement. In March the High Court of Kenya voided the country’s double tax treaty with Mauritius after the Tax Justice Network Africa filed a lawsuit arguing that the terms of the arrangement could enable Kenyan companies to avoid tax by routing their investments through Mauritian shell companies. The court ruled on constitutional grounds, finding that the Kenyan government failed to properly ratify the arrangement, and the countries have since re-signed their treaty. According to the ICIJ’s reporting, other jurisdictions concerned about their tax treaties with Mauritius may replicate this strategy.

As for developing a U.N. tax body, movement on that front could gather steam if the U.N. G-77 — a caucus that now includes more than 130 developing countries — ramps up its own repeated call for the formation of an intergovernmental tax body.

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