7 ms·

Mauritius Leaks exposes tiny tax haven's role in vast offshore system

169 points by aaronbrethorst 7y ago

newyankee 7y ago
A lot of Indian black money (especially politicians) is somehow routed back to India via Mauritius. Tbh i do not understand how such things work and it is anecdotal. I do know that Mauritius has always been one of the top source of Foreign direct investment for India and i think some preferable treaties help them.
- sremani 7y ago
  A quick search resulted in the following. ________________________________________________________ The tax treaty between India and Mauritius was signed in 1982 in keeping with India's strategic interests in the Indian Ocean and India's close cultural links with Mauritius. The treaty provides for a capital gains tax exemption to a Mauritius resident on transfer of Indian securities.
- JumpCrisscross 7y ago
  > A lot of Indian black money (especially politicians) is somehow routed back to India via Mauritius The black money hides amidst legitimate flows. Mauritian courts are generally well run, at least in comparison to Indian courts. (The tax code is also much simpler.) Foreign investors into India will thus set up a Mauritian entity through which they'll invest under Mauritian law. This is similar to e.g. FDI into China often flowing through Hong Kong or investments into e.g. Wyoming routing through a Delaware entity.
newyankee 7y ago
https://qz.com/1667447/sequoia-capitals-scheme-to-use-mauritius-to-avoid-indian-taxes/ https://qz.com/1667447/sequoia-capitals-scheme-to-use-maurit... Another link by QZ. It highlights how Sequoia used this to its advantage in India and one of its invested companies is now under investigation for money laundering for P.Chidambaram's (former finance minister) son. Again anecdotal and i know this is frowned in HN, but unofficial estimates put P Chidambaram's family net worth at 20k crore INR (~ 3 billion $).
- charlesdm 7y ago
  If the Mauritian tax treaty is such a pain for India, then they should just get rid of it. They clearly haven't, so it must be of some value -- thus you can't shame companies for using it to legally sidestep taxes.
  - rohit2412 7y ago
    It is a pain to India. It is not a pain to the politicians though.
    - JumpCrisscross 7y ago
      > It is a pain to India Do we have evidence of this? A lot of investment into India would not occur without a stable legal and tax environment on which to stage it. Traditionally, those have been Singapore and Mauritius.
      - jddj 7y ago
        Are we sure that it's the stability of Mauritius which is the sought after quality here? That seems a little euphemistic. Not that it's an unstable nation, all things considered, but I feel like it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability". From the article, quoted from a leaked email: This is primarily being done to ensure the Druva restructure does not result in it becoming taxable.
        JumpCrisscross 7y ago
        > it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability" Why does it go without saying? Indian courts can take 10+ years to resolve simple disputes; Mauritian courts are much faster. A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with.
Scoundreller 7y ago
A Mauritian passport is a useful one too: no visa required to go to EU, most of Southern Africa, Russia or China. eVisa like most others for India.
- rolltiide 7y ago
  Do they sell that too? Asking for myself
  - Scoundreller 7y ago
    Dunno. Just was surprised to read about it once and figured it would pair nicely with a US or Canadian passport.
  - kirubakaran 7y ago
    I searched around a bit out of curiosity and it looks like it is USD500k investment to get permanent residence and 2 years of residence to apply for citizenship.
    - rolltiide 7y ago
      Not bad just trying not to get self-imposed exile on an atoll for 2 years
rcpt 7y ago
Mauritius also has some of the worst surf localism in the world https://www.youtube.com/watch?v=NyNv69tyXJ4 https://www.youtube.com/watch?v=NyNv69tyXJ4
- komali2 7y ago
  That sucks but seems irrelevant.
- uramfndit 7y ago
  Oh wow I never knew that.
- anherome21003 7y ago
  The problem is that there are too many South Africans crowding up the best surfspots. Also making youtube videos about the spots dont help
  - uramfndit 7y ago
    Beating up a teen is not a solution to this "problem"
peter_retief 7y ago
African politicians steal taxes, I am from South Africa and see the corruption first hand. Mauritius is a well run country unlike most of Africa, makes sense to use it as a base to do business in Africa
- gitrog 7y ago
  Politicians stealing money isn't solely an African phenomenon, and in many "first world" countries the lower and middle classes suffer due to lobbying which politicians can use to enrich themselves and their cronies.
- t3rse 7y ago
  Ugandan here: when I read this story, I admit this was exactly what came to mind. Of course the system is dodgy if you can leverage Mauritius to get around taxes but the vast majority of taxes in Africa is just padding on a politicians bank account.
deleted 7y ago
[deleted]
rolltiide 7y ago
ICIJ should consider an alternative title such as "Hackers reveal client data for Bermuda based law firm and we bought in on Empire for .25 BTC" "Save on taxes by using this little known trick!" "Mauritius legislature competitive in global trade" "Africa single market growing towards being a wild success, thanks to Mauritius" they choose to use words like "siphon", OP chose to use words like "exposes" they could just as benignly report a "trade imbalance" such as when basically any G7 country combination is being discussed
piker 7y ago
A lot of the content here seems to be justifying breaching a law firm's security and disclosing sensitive attorney-client privileged information. Unlike some of the prior disclosures, there doesn't seem to be any allegation that the tax haven was being used for money laundering purposes (cf. Panama Papers), but just that the country itself was somehow acting unfairly to less developed jurisdictions. In addition to some of the sentiment below that the benefits in the form of capital inflows of such stabilizing treaties may exceed their costs in the form of top-line cap gains tax, etc., this distinction is striking. It goes so far as to call out the specifics of an investment by the founder of Live Aid, without accusing him of doing anything illegal or, arguably, immoral. While there is definitely educational benefit to understanding the potential effects of these sorts of treaties, at what point do these leaks cease to be newsworthy and begin to be gossip?
- joshypants 7y ago
  Sometimes we need to look at the second-order effects of something to decide whether it is moral or not.
- d4rti 7y ago
  A lot of content here is justifying avoiding taxation on the grounds that it's questionably legal and even arguing that it's not necessarily immoral.
- davidwitt415 7y ago
  It's money laundering of a different sort; the meaningful business activities are not taking place in Mauritius, it is just a post office box and some legal forms, so it is a tax dodge to claim the business is conducted in Mauritius (or any of the so-called tax havens). Taxes should be paid where a business does its real business activities. Tax avoidance is a huge business, and legions of lawyers and accountants have been employed for generations to find or create these loopholes. While they may be considered legal in narrow terms, they most often skirt the intent of the law. As the legality of these arrangements is often questionable, it is also right to look at them morally. After all, laws are supposed to be equitable, and a system may be 'legal' while also being wrong, either morally or equitably. Therefore, while Bob Geldolf's investments by be technically legal, it is still in the public's interest to know about these secretive arrangements, especially since 'Sir' Bob made his public acclaim over his supposed charitable interest in Africa, which is now revealed to be financial above all else. It's not gossip if it is in the public's material interest.
mycall 7y ago
> In Uganda, more than 40% of the population lives on less than $2 a day. I could retire now! In my alternative universe, all system administrators unite and take back all the stolen money from the poor. They are effectively the only people who can do this.
haltingproblem 7y ago
Former HF portfolio manager. I actually set up a Mauritius entity to invest into India about a decade ago for a large multi-strategy HF. The suggestion that Mauritius is a stable and well-understood platform for investing into India has the causality completely backwards. Mauritius is stable and prosperous because of the investments that are siphoned through it and the local economy it creates! Compare Mauritius to Maldives for an abject lesson on the effects of the offshore economy on an Island nation. The fact that the funds are invested in India through Mauritius does not exempt them from Indian laws! The only thing it does is that disputes among the passthru firm's shareholders are resolved in Mauritius court. Similar to using Delaware in the US, it does not exempt the company from US taxes or laws but just makes intra-company disputes the domain of Delaware Chancellery court where laws are well-nderstood. The only reason for any institution to use Mauritius as a conduit is to avoid taxes under the DTAA and to anonymize the source of funds to Indian authorities. Any large institution will find domiciles to minimize their tax burden. They engage law firms and accountants who bill hundreds of dollars an hour to do this. Every single institutional investor across the spectrum from hedge funds, private equity, venture capital funds to corporations does this. Any other suggestion to the contrary is just fantastic. [edits for clarity]

A lot of Indian black money (especially politicians) is somehow routed back to India via Mauritius. Tbh i do not understand how such things work and it is anecdotal. I do know that Mauritius has always been one of the top source of Foreign direct investment for India and i think some preferable treaties help them.

sremani 7y ago
A quick search resulted in the following. ________________________________________________________ The tax treaty between India and Mauritius was signed in 1982 in keeping with India's strategic interests in the Indian Ocean and India's close cultural links with Mauritius. The treaty provides for a capital gains tax exemption to a Mauritius resident on transfer of Indian securities.
JumpCrisscross 7y ago
> A lot of Indian black money (especially politicians) is somehow routed back to India via Mauritius The black money hides amidst legitimate flows. Mauritian courts are generally well run, at least in comparison to Indian courts. (The tax code is also much simpler.) Foreign investors into India will thus set up a Mauritian entity through which they'll invest under Mauritian law. This is similar to e.g. FDI into China often flowing through Hong Kong or investments into e.g. Wyoming routing through a Delaware entity.

newyankee 7y ago

https://qz.com/1667447/sequoia-capitals-scheme-to-use-mauritius-to-avoid-indian-taxes/ https://qz.com/1667447/sequoia-capitals-scheme-to-use-maurit... Another link by QZ. It highlights how Sequoia used this to its advantage in India and one of its invested companies is now under investigation for money laundering for P.Chidambaram's (former finance minister) son. Again anecdotal and i know this is frowned in HN, but unofficial estimates put P Chidambaram's family net worth at 20k crore INR (~ 3 billion $).

charlesdm 7y ago
If the Mauritian tax treaty is such a pain for India, then they should just get rid of it. They clearly haven't, so it must be of some value -- thus you can't shame companies for using it to legally sidestep taxes.
- rohit2412 7y ago
  It is a pain to India. It is not a pain to the politicians though.
  - JumpCrisscross 7y ago
    > It is a pain to India Do we have evidence of this? A lot of investment into India would not occur without a stable legal and tax environment on which to stage it. Traditionally, those have been Singapore and Mauritius.
    - jddj 7y ago
      Are we sure that it's the stability of Mauritius which is the sought after quality here? That seems a little euphemistic. Not that it's an unstable nation, all things considered, but I feel like it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability". From the article, quoted from a leaked email: This is primarily being done to ensure the Druva restructure does not result in it becoming taxable.
      - JumpCrisscross 7y ago
        > it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability" Why does it go without saying? Indian courts can take 10+ years to resolve simple disputes; Mauritian courts are much faster. A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with.

Scoundreller 7y ago

A Mauritian passport is a useful one too: no visa required to go to EU, most of Southern Africa, Russia or China. eVisa like most others for India.

rolltiide 7y ago
Do they sell that too? Asking for myself
- Scoundreller 7y ago
  Dunno. Just was surprised to read about it once and figured it would pair nicely with a US or Canadian passport.
- kirubakaran 7y ago
  I searched around a bit out of curiosity and it looks like it is USD500k investment to get permanent residence and 2 years of residence to apply for citizenship.
  - rolltiide 7y ago
    Not bad just trying not to get self-imposed exile on an atoll for 2 years

rcpt 7y ago

Mauritius also has some of the worst surf localism in the world https://www.youtube.com/watch?v=NyNv69tyXJ4 https://www.youtube.com/watch?v=NyNv69tyXJ4

komali2 7y ago
That sucks but seems irrelevant.
uramfndit 7y ago
Oh wow I never knew that.
anherome21003 7y ago
The problem is that there are too many South Africans crowding up the best surfspots. Also making youtube videos about the spots dont help
- uramfndit 7y ago
  Beating up a teen is not a solution to this "problem"

peter_retief 7y ago

African politicians steal taxes, I am from South Africa and see the corruption first hand. Mauritius is a well run country unlike most of Africa, makes sense to use it as a base to do business in Africa

gitrog 7y ago
Politicians stealing money isn't solely an African phenomenon, and in many "first world" countries the lower and middle classes suffer due to lobbying which politicians can use to enrich themselves and their cronies.
t3rse 7y ago
Ugandan here: when I read this story, I admit this was exactly what came to mind. Of course the system is dodgy if you can leverage Mauritius to get around taxes but the vast majority of taxes in Africa is just padding on a politicians bank account.

deleted 7y ago

[deleted]

rolltiide 7y ago

ICIJ should consider an alternative title such as "Hackers reveal client data for Bermuda based law firm and we bought in on Empire for .25 BTC" "Save on taxes by using this little known trick!" "Mauritius legislature competitive in global trade" "Africa single market growing towards being a wild success, thanks to Mauritius" they choose to use words like "siphon", OP chose to use words like "exposes" they could just as benignly report a "trade imbalance" such as when basically any G7 country combination is being discussed

piker 7y ago

A lot of the content here seems to be justifying breaching a law firm's security and disclosing sensitive attorney-client privileged information. Unlike some of the prior disclosures, there doesn't seem to be any allegation that the tax haven was being used for money laundering purposes (cf. Panama Papers), but just that the country itself was somehow acting unfairly to less developed jurisdictions. In addition to some of the sentiment below that the benefits in the form of capital inflows of such stabilizing treaties may exceed their costs in the form of top-line cap gains tax, etc., this distinction is striking. It goes so far as to call out the specifics of an investment by the founder of Live Aid, without accusing him of doing anything illegal or, arguably, immoral. While there is definitely educational benefit to understanding the potential effects of these sorts of treaties, at what point do these leaks cease to be newsworthy and begin to be gossip?

joshypants 7y ago
Sometimes we need to look at the second-order effects of something to decide whether it is moral or not.
d4rti 7y ago
A lot of content here is justifying avoiding taxation on the grounds that it's questionably legal and even arguing that it's not necessarily immoral.
davidwitt415 7y ago
It's money laundering of a different sort; the meaningful business activities are not taking place in Mauritius, it is just a post office box and some legal forms, so it is a tax dodge to claim the business is conducted in Mauritius (or any of the so-called tax havens). Taxes should be paid where a business does its real business activities. Tax avoidance is a huge business, and legions of lawyers and accountants have been employed for generations to find or create these loopholes. While they may be considered legal in narrow terms, they most often skirt the intent of the law. As the legality of these arrangements is often questionable, it is also right to look at them morally. After all, laws are supposed to be equitable, and a system may be 'legal' while also being wrong, either morally or equitably. Therefore, while Bob Geldolf's investments by be technically legal, it is still in the public's interest to know about these secretive arrangements, especially since 'Sir' Bob made his public acclaim over his supposed charitable interest in Africa, which is now revealed to be financial above all else. It's not gossip if it is in the public's material interest.

mycall 7y ago

> In Uganda, more than 40% of the population lives on less than $2 a day. I could retire now! In my alternative universe, all system administrators unite and take back all the stolen money from the poor. They are effectively the only people who can do this.

haltingproblem 7y ago

Former HF portfolio manager. I actually set up a Mauritius entity to invest into India about a decade ago for a large multi-strategy HF. The suggestion that Mauritius is a stable and well-understood platform for investing into India has the causality completely backwards. Mauritius is stable and prosperous because of the investments that are siphoned through it and the local economy it creates! Compare Mauritius to Maldives for an abject lesson on the effects of the offshore economy on an Island nation. The fact that the funds are invested in India through Mauritius does not exempt them from Indian laws! The only thing it does is that disputes among the passthru firm's shareholders are resolved in Mauritius court. Similar to using Delaware in the US, it does not exempt the company from US taxes or laws but just makes intra-company disputes the domain of Delaware Chancellery court where laws are well-nderstood. The only reason for any institution to use Mauritius as a conduit is to avoid taxes under the DTAA and to anonymize the source of funds to Indian authorities. Any large institution will find domiciles to minimize their tax burden. They engage law firms and accountants who bill hundreds of dollars an hour to do this. Every single institutional investor across the spectrum from hedge funds, private equity, venture capital funds to corporations does this. Any other suggestion to the contrary is just fantastic. [edits for clarity]