The Mauritian Offshore sector
Two Nobel Prize winners namely Mr. James Edward Meade CB, FBA winner of the 1977 Nobel Memorial Prize in Economic Sciences and Sir Vidiadhar Surajprasad Naipaul, winner of the 2001 the Nobel Prize for Literature but one verdict:
“Mauritius post-independence in 1968 had little hope and awaited a bleak future.”
History or rather Mauritius, proved the dire prognostications famously wrong. Indeed, we had it on the highest possible authority which stated that Mauritius was a strong candidate for failure because of being a very typical African economy – * monocrop;
* prone to terms of trade shocks;
* witnessing rapid growth rate in population; and
* susceptible to ethnic tensions. .
But what the two Nobel Prize winners failed to notice is that Mauritius being well located in the Indian Ocean was destined to succeed.
Mauritius has a bright future not only because of the offshore sector, but it will not be wrong to say that this sector is contributing towards its success. It has been nearly two decades since Mauritius initiated a comprehensive offshore legislation. Over the years skepticism has thawed away as a number of positive developments began to unfold.
A brief history
It was in 1992 that the Government promulgated the first legislation dedicated to this sector. As a result, the Mauritius Offshore Business Activities Authority (MOBAA) was set up to act as the regulatory and licensing body for all non-banking offshore business activities. The fiscal regime provided attractive features to the investment community through the network of double taxation agreements and local incentives. As from 1 July 1998, offshore companies were liable to a uniform tax rate of 15% as provided for under the Income Tax Act 1995. The fiscal regime aimed at facilitating the extension of the treaty network as well as creating a level playing field for the offshore and onshore sectors, thus integrating the offshore sector with the domestic economy.
In May 2000, Mauritius wrote a “commitment letter” to the OECD in order to avoid inclusion on the OECD’s list of jurisdictions which offer “unfair” tax competition. Partly as a result of this commitment, the Government passed a range of replacement legislation in 2001 including the Financial Services Development Act 2001(FSDA), which set up the Financial Services Commission (FSC) to replace MOBAA. The increasing popularity of the offshore sector made Mauritius to update its laws and the Financial Services Act 2007 was passed.
A bright future?
From the outset, Mauritius has the necessary characteristics to position itself as a platform for investing in other countries. The island’s solid economic base, along with its natural comparative advantages of geography and time zone, as well as its rich human resource base have been and continue to be at the basis of the success of the Mauritius offshore centre.
Mauritius has launched its offshore in the early nineties by becoming progressively a niche channel for inward investment in India. Whilst India remains the dominant destination for investments through Mauritius, the country is now gradually diversifying into new markets by focusing on China, South East Asia and more strongly on the Southern and Eastern African market, especially South Africa. The gradual relaxation of exchange control measures in South Africa has triggered significant interest from South African based enterprises to set up their business operations in Mauritius. \ The outbound investment opportunities for South African businesses are tremendous under the Mauritius offshore regime. Financial activities such as trade financing, leasing operations, loan syndication, equity financing, asset securitisation and other structured financing operations are apt to be carried out through Mauritius. Another factor contributing to the success of the offshore sector in Mauritius is the availability of a large...
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