This chapter provides a critical analysis of the cardinal sentiments gathered from major stakeholders coming from the Global Business Sector, the Ministry of Foreign personal businesss, Regional Integration and International Trade and sub-departments of the Ministry of Finance and Economic Development.
Datas collected from the FSC pertaining to Issue of licences for the old three old ages will be helpful in measuring the direct impact that the proclamation of the execution of the GAAR had over the Global Business Sector of Mauritius
5.1 Result and Analysis of the study
The undermentioned nowadayss the findings of the study carried out in the context of this survey.
The first portion of the study, that is question one to seven focused more on the Indo-Mauritius dual revenue enhancement pact, specifically on the market reaction vis-a-vis the GAAR proposed by the Indian Finance Minister in the recent Finance Bill 2012 and the 2nd portion connoting inquiry eight to eleven sheds more light on how Mauritius is being viewed as a platform to put in Africa.
5.1.1 Field represented by respondents
As has been shown in Figure 5.1, respondents of this study, consist of three Offshore Management Companies ( OMC ) , one Financial Services committee ( FSC ) , one Mauritius Revenue Authority ( MRA ) , three Offshore Banks, one Ministry of Foreign Affairs, Regional Integration and International Trade and one Board of Investment ( BOI ) .
5.1.2 Opinion over the GAAR
While showing their positions over the GAAR, 80 % of the respondents strongly believe that deficiency of lucidity over the GAAR has brought about uncertainness therefore haltering investor ‘s sentiments. The respondents further explained the investors concern. Harmonizing to them, investors fear that the Indian Revenue section may ‘use ‘ the GAAR as a agency to deny pact benefits in order to acquire some exempted long term capital additions taxed in India. Therefore, they do non speak up in favor of the execution of the GAAR.
The remainder 20 % of the respondents are in favor of the execution of the GAAR and back up their statement by explicating that GAAR will let Mauritius to continue its credibleness as an Offshore Financial Centre ( OFC ) given that India will no longer inquiry Mauritius.
5.1.3 Reasons for postponing GAAR by 3 old ages
Soon after the proclamation of the execution of the GAAR, the Indian Government deferred its execution by one twelvemonth and subsequently extended it to three old ages. Harmonizing to the bulk of 70 % of our respondents there are multiple grounds for this postponement of the execution of the GAAR to 2016. Following some of the grounds mentioned out in the study in the ShomeA ExpertA Committee study, the respondents opined that the postponement is due to the undermentioned grounds:
To minimise the farther weakening of the Indian economic system which has been jeopardized following opposition on the portion of investors over the GAAR issue.
To let entities to rearrange themselves to follow with the commercial substance trial, a trial which is carried out to take into history the existent purpose of the parties involved and to verify the intent of set uping an agreement for finding the revenue enhancement effects.
To give clip to revenue enhancement decision makers to acquire their qualified Indian officers trained to cover with GAAR issues
Furthermore, two respondents affirmed that the postponement is chiefly to happen an option to the GAAR so as to counter the impression of abuse of the Indo-Mauritian revenue enhancement pact
5.1.4 Tax Residency Certificate ( TRC ) to turn to Indian Revenue Authorities Concerns
Following a long argument whether there is a abuse of the Indo -Mauritius revenue enhancement dainty, Tax Residency Certificate ( TRC ) , representing a bonafide belief of the taxpayer to claim pact benefit under the India-Mauritius revenue enhancement pact was provided by Mauritius governments for Indian authorization ‘s reassurance. However such a step failed to turn to the Indian Revenue Authorities concerns and our respondents once more enumerate a figure of grounds for that. Merely one respondent remained soundless on this affair but two respondents hold responsible the revenue enhancement Torahs in Mauritius. While one of the two believes that there is a spread in the jurisprudence which is haltering investings, the other refers to the indulgent revenue enhancement Torahs in Mauritius which plays in favor of investors who are taking at revenue enhancement turning away.
With respects to the TRC, two respondents stated that the Indian Revenue Authorities concern is the deficiency of stringent regulations on behalf of the Mauritian Revenue Authority for the allotment of TRC ‘s while the respondent from the FSC added that the Indian Authorities wants more than a TRC to warrant substance in Mauritius. Another respondent farther mentioned that Mauritius is ever looked at with oppugning eyes as there is a batch of misperception about the planetary concern sector of Mauritius in India which needs to be clarified. He elaborated further and said that the Indo-Mauritius pact had ever been supplying investors with certainty and predictability which enabled many investors to construction their investings in the most tax-efficient mode. However, uncertainness and bias was ab initio brought about by the Indian imperativeness studies sing the Mauritius-India DTA. Many respondents referred to the failure of the TRC to supply reassurance lead to the proclamation of the execution of the GAAR. However, one respondent wholly disagree with the above and province that the TRC did non failed to reassure the Indian Revenue Authorities but in fact Mauritius needs to merely guarantee that no misinterpretation and inquiries is raised over the revenue enhancement Torahs in Mauritius, by exposing greater transparence.
5.1.5 Chemical reaction of Investors and companies
Soon after the proclamation of the execution of the GAAR, an article dated 09.08.2012 was published in the L’Express and stated the followers ; “ Two twelve companies packed their bags from the Offshore sector, shortly after the Indian Finance Minister announced the execution of the GAAR ” . While the above statement depicted the immediate panic province of investors, our respondents were therefore called to give their positions over the prevalent state of affairs among investors and companies.
About all the respondents believe that immense degree of uncertainness still prevails and the figure of investors has decreased well since the proclamation of the execution of the GAAR. Furthermore, two respondents affirm that some companies are still packing their bags to settle elsewhere, but assure us by saying that the grade to which the Offshore sector is affected is minimum.
The FSC further added that Investors ever look for certainty and predictability, therefore really investors are in a delay to see the anticipated development in the DTAA between India and Mauritius. In order to see the degree of hesitance coming from investors in the twelvemonth 2012 after the proclamation of the execution of the GAAR, a expression at the figure of GBC1 and GBC 2 licences issued for this twelvemonth was drafted.
Figure 5.3[ 1 ]was generated from informations provided by the FSC and it shows the figure of GBC1 licences issued monthly in 2010, 2011 and 2012.
Figure 5.3 clearly shows that the figure of licences issued in January 2012 is far better than the same period in 2010 and 2011, nevertheless the tendency after April 2012 boulder clay December 2012 is found below the figure of licences issued in 2010 and 2011. It can therefore be deduced that the 2012 tendency captures the market uncertainness shortly after the Indian Finance Minister presented the Finance Bill 2012 whereby the execution of the GAAR was mentioned. It is extremely known that The Low income revenue enhancement government and favourable DTA signed with India in 1983 has ever placed Mauritius at the top list for investors to route their investings into India a little expression at the development of planetary concern entities in Mauritius confirms the fact.
5.1.6 Development of the planetary concern entities in Mauritius
Beginning: FSC one-year study and Statistical Bulletins
Figure 5.4[ 2 ]illustrates the development of non-banking offshore entities. The chart clearly shows the development of the figure of planetary concern entities in Mauritius throughout the twelvemonth, since the constitution of the FSC boulder clay day of the month. The figure of GBC1 and GBC 2 Global Business companies as can be seen, has increased significantly during the old ages, therefore picturing the penchant that investors have for utilizing Mauritius to route their investing. Global Funds and Management Companies besides grew easy stand foring a sum of 3.45 % and 0.60 % severally of the entire entities in 2012. The immense autumn in the figure of GBC 2 entities can be attributed to the fact that an economic crisis was predominating in twelvemonth 2008 to get downing 2010 and the gradual universe economic system recovery can finally be seen as an addition in the figure of GBC2 is noted in the twelvemonth 2011 and the twelvemonth after. However upon holding a close expression at the figure of GBC 2 licences issued monthly for the twelvemonth 2012, it can be seen that along with a lessening in the figure of GBC1 licences issued, even GBC 2 licences experienced a autumn in figure.
GBC 2 can non profit from the Mauritius Double Taxation Agreements, nevertheless the figure of licences issued for GBC 2 in 2012 shows a lower figure than the old twelvemonth 2010 and 2011. A plausible account for this may be because investors worry about the different imperativeness coverage where Mauritius is being entitled as a revenue enhancement oasis. Besides the fright the planetary concern sector in Mauritius may be brought under extra examination due to predominating uncertainness, which further inquiries the conformity and transparence of the offshore sector as a whole. Hence here the FSC and the MRA demand to do all necessary attempts to measure the conformity and transparence of our planetary concern sector and to take necessary action in this way.
5.1.6 Dependency of Mauritius on the Indo-Mauritius DTA.
The above consequence clearly showed that Mauritius is extremely dependent on the Indo-Mauritius DTA. As shown in figure 5.6, even our respondents either extremely agreed to it or merely agreed to it. None of the respondents took a impersonal stance or differ to the above stated fact.
5.1.6 ‘Limitation of Benefits ‘ to convey back certainty
Among the figure of suggestions to convey back certainty in the offshore sector and to guarantee that the Indo-Mauritius pact is non being misused, the Indian Governments have been pressing for the debut of a clause similar to one as in the India-Singapore dual revenue enhancement pact, which is ‘Limitation of Benefits ‘ , into the Indo-Mauritius pact. Noting that ‘Limitation of Benefits ‘ articles restricts the advantages provided under revenue enhancement pacts to occupants non run intoing the extra trials, among which is the substance trial, all the respondents emphasis on the acceptance of a clause of restriction of benefits comparatively less rigorous as compared to the India-Singapore pact so that Mauritius retain its bing competitory border. This has been shown in figure 5.6. Furthermore, the respondent from the MRA opined that a clause similar to the India-Singapore pact should non be adopted given any fortunes as this will ensue in Mauritius losing its competitory advantage, but he does favor the acceptance of a lesser stiff clause.
5.1.6 Possibility of the Indo- Mauritius Treaty to prolong in the hereafter
Predominating uncertainness state of affairs brought about the inquiry of whether there is a possibility for the Indo-Mauritius DTA to no longer remain effectual in the close hereafter. Despite all the reassurance from the Minister of Foreign Affairs, Regional Integration and International Trade, my study produced a comparatively surprising consequence to the above inquiry which is shown below.
Figure 5.7 shows that the bulk of the respondents affirm that the pact will non prolong, given the close execution of the GAAR while 3 respondents steadfastly believe that the pact is here to remain for longer old ages. The above consequence in figure 5.7 explains why there is a immense sum of uncertainness prevailing in the offshore sector.
5.1.8 No Indo-Mauritius pact in the hereafter
Many hindrances shall come up if DTA between Mauritius and India no longer remain in force in the hereafter. Harmonizing to our respondents all are of position that the Mauritanian economic system shall be adversely affected in footings of decreased degree of investings which shall finally take to the downswing of the Mauritius economic system. Acknowledging that such a state of affairs is really baleful and may hold dramatic effects in the hereafter, one of the respondents stand foring the offshore sector further stated that there is a demand for Mauritius to diversify its geographical base of its Global Business Sector to cut down its immense dependence on the Indo-Mauritius DTA. Furthermore another respondent stated that many people will non hold occupation chances ‘ in the offshore sector as a Domino consequence may imply and take to other treaty spouses wishing to hold same pact commissariats as the India- Mauritius pact.
5.1.9 Mauritius as a gateway to Africa.
As at day of the month, Mauritius has 13 revenue enhancement pacts in force with Africa, with a mark of doing it 30 pacts in the close hereafter. Mauritius is besides being viewed as a agency for outward investing into Africa by Indians, therefore in position of farther diversifying the Global Business Sector and cut downing our dependence over the Indo-Mauritius Tax pact, Mauritius is being extremely promoted as the ideal ‘Gateway to Africa ‘ .
When asked how far they agreed to Mauritius being the ideal gateway to Africa, merely one respondent preferred to take a impersonal base with the remainder either strongly holding or merely holding to the above statement. This strictly shows that Mauritius is decidedly being perceived as the best gateway to Africa. The bulk supported their position by foregrounding the figure of pacts that Mauritius already has with Africa which plays in favour of investors to utilize Mauritius as a platform to put in Africa. They besides emphasize that besides sharing cultural ties with Africa, Mauritius is besides a member of the African Union, Southern African Development Community ( SADC ) , Common Market for Eastern and Southern AfricaA ( COMESA ) and Indian Ocean Commission ( IOC ) .
The respondent, who preferred to take a impersonal stance, backed his response by speak uping that Investors do non necessitate to utilize Mauritius as they can put in Africa straight given that even Mauritius has non to the full tapped the immense potencies in Africa.
Notwithstanding the above, all the respondents agreed that the accruing benefits to Mauritius while moving asA the entree Centre to Africa will in fact be the birth of another major pillar of our economic system known as the Global Business Sector. The FSC further adds that more value activity should be undertaken in Mauritius, so that Mauritius continues to derive in the long tally. Following the same line of idea another respondent stated that Mauritius needs to guarantee in acquiring more commercial principle and non see the Africa path as a conduit for this will non be sustainable, nevertheless if value add-on is created, such as procurance Centre, exchequer hub, immense direct and indirect benefits will ensue doing enlargement of the Mauritanian economic system. A respondent from an seaward direction company besides adds that Mauritius can place itself to go the unchallenged gateway for all cross-border investing into Africa and the remainder of the universe, traveling far beyond what Singapore and Hong Kong are for Asia and what Dubai is for the Middle East and do better than the Celtic Tiger of Ireland.
Mauritius has over clip gained immense reputation as an ideal offshore Centre. With farther diversifying and spread outing as a base into Africa, there are legion challenges that Mauritius needs to work upon to keep its place as the preferable OFC for this part. Consequently all our respondents believe that Mauritius needs to guarantee that Internet, telecommunication and dealing costs are lowered. A respondent from the offshore bank stresses that substructure and connectivity with African states will harvest immense benefits in the close hereafter.
The respondents further emphasize that there is a demand to supply developing to make an even more specialised work force in the offshore sector.
This chapter grasped the reaction of the market following the proclamation by the Indian Finance Minister of the execution of the GAAR in the close hereafter and besides shed visible radiations on how far Mauritius is thought to be the ideal gateway to put in Africa. The following chapter concludes the survey.