By Marco Floreale
The recent leaking of the confidential financial information of thousands of wealthy individuals and companies in the ‘Paradise Papers’, following on the earlier ‘Panama Papers’, has put Mauritius and its offshore financial sector squarely in the spotlight, alongside other offshore jurisdictions.
The leaks came against the background of an international crackdown on tax avoidance, treaty shopping and other abuses, and an emerging new global treaties regime. It raised many questions about the international offshore finance industry.
In Mauritius too it sparked a lively debate, which, as a form of introspection, is always a good thing – because, no matter how well-intentioned, regulated or securely structured a system may be, there will always be those who will unscrupulously seek and find loopholes to abuse it. However, every coin has two sides, and it would seem to be the case here too.
On the one hand Financial Services Minister Sudhir Sesungkur pointed out that Mauritius applies internationally respected norms and standards. Prime Minister Pravind Jugnauth maintains Mauritius has evolved into an “international financial centre of excellence and repute”. This is echoed by independent people in the financial industry, like Ravin Dajee, Managing Director of Barclays Bank Mauritius, who has been quoted on Mondaq.com commending ‘the high quality of service, the legal and regulatory frameworks, and the excellent reputation of the jurisdiction” of Mauritius.
Global standards are applied by our local regulators such as the Financial Services Commission or the Bank of Mauritius. Mauritius has also raised the bar on shell companies through which income is routed in low-tax jurisdictions. Incentives were announced earlier aimed at attracting fund and asset managers, financial companies’ regional headquarters, treasury management centres, and international law firms to these shores.
On the other hand, the Paradise Papers revealed, among many others, the affairs of three British TV stars who diverted £2-million via Mauritian firms to avoid paying taxes. Some point out that the 2015 collapse of BAI, a financial conglomerate, exposed regulatory failings. There have also been the cases of controversial Angolan billionaire Alvaro Sobrinho and Camilla Crociani, raised in this publication recently.
The point is, if all the rules are followed, it is not illegal or immoral to want to diversify one’s investment portfolio offshore for whatever legal reason, whether to benefit from lower-tax incentives, grow and protect one’s savings and wealth, or to safeguard it against economic and political turmoil. For instance, the current political instability in South Africa and Zimbabwe makes a strong case for the latter. Also, the right to privacy in banking and financial affairs, is a time-honoured and respected practice.
The key would lie in the investor’s choice of partners or advisers. Be sure to select a financial advisory firm that is reputable, is registered, has qualified advisers who display the highest integrity, and is professional in every sense of the word. Of those there are enough in Mauritius, my own firm included.
Using such firms, alongside constant vigilance to identify and improve any regulatory loopholes or shortcomings in the system, will ensure a deserving future for the offshore financial services industry of Mauritius.
Marco Floreale is the Managing Director of Carrick Investment Services, Mauritius, which specialises in wealth and capital management. The opinions expressed in this article do not constitute nor should be construed as financial advice.