
Mauritius Leaks exposes tiny tax haven's role in vast offshore system - aaronbrethorst
https://www.icij.org/investigations/mauritius-leaks/treasure-island-leak-reveals-how-mauritius-siphons-tax-from-poor-nations-to-benefit-elites/
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haltingproblem
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]

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piker
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?

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davidwitt415
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.

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newyankee
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.

~~~
JumpCrisscross
> _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.

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newyankee
[https://qz.com/1667447/sequoia-capitals-scheme-to-use-
maurit...](https://qz.com/1667447/sequoia-capitals-scheme-to-use-mauritius-to-
avoid-indian-taxes/)

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
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
It is a pain to India. It is not a pain to the politicians though.

~~~
JumpCrisscross
> _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
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
> _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.

~~~
SmileyRedBall
@JumpCrisscross: "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."

Yea, it's got nothing to do with extracting the maximum amount of revenue out
of the host country whilst managing to avoid giving anything back in taxation
:]

~~~
JumpCrisscross
> _whilst managing to avoid giving anything back in taxation_

I’m comparing accounting costs. Both paid to the same offshore accountant.
Indian tax codes are complicated and unpredictable. Mauritian ones are not. As
an outsider, simplicity wins. (I’d gladly pay a higher foreign tax rate if it
meant simpler paperwork.)

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Scoundreller
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
Do they sell that too? Asking for myself

~~~
kirubakaran
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
Not bad just trying not to get self-imposed exile on an atoll for 2 years

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mycall
> 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.

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peter_retief
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

~~~
t3rse
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.

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rolltiide
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

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rcpt
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
That sucks but seems irrelevant.

