“Mauritius is a gem in the Indian Ocean”. This has been advanced by many experts in the financial sector. The country is striving to become an International financial centre of excellence in the region and to join the league of high-income countries. It has already undergone through several improvements and its per-capita income of $10,500 is already way ahead of the region’s average of $4,000.
The “tax heaven”
Mauritius has branded itself as a ‘tax heaven’ for quite some time. However, following the ‘Mauritius Leaks’ article, the country has decided to overhaul its tax regime and rebrand itself. As such, it revised several rules around both corporate and personal tax rates, indirect taxes and tax administration. For instance, now, an income-tax holiday supports companies setting up e-commerce platforms and peer-to-peer lending operators. Moreover, rules are aligned with global best practices, including attribution of income according to the “arm’s length” principle.
These changes have had immediate results: The Organization for Economic Co-operation and Development has stated that Mauritius’s tax regime doesn’t permit or encourage harmful practices and International Monetary Fund (IMF) named it among the 10 countries holding 40% of global phantom FDI.
A growing economy
It is predicted that the country’s Gross Domestic Product (GDP) will be 4.1% in 2020. Additionally, the government expects that there will be more Foreign Direct Investment (FDI) in the coming years, especially considering the fact that it has moved to the 13th position (up by seven places) in the World Bank’s Ease of Doing Business 2020 ranking, against an overall “weak performance” across Sub-Saharan Africa.
Additionally, it is now at the second position in the Absa Africa Financial Markets Index which measures the continent’s most advanced financial markets.
Opportunities for foreign investment
To make things easier for foreign development and attract more investors, Mauritius has been creating more opportunities for growth. For instance, it is keen on revitalizing tourism, developing the ocean economy, increasing output of renewable energy, enhancing the deployment and adoption of modern technology and building smart cities. It has enacted the Business Facilitation Act, amending 26 legislations designed to spur private investments. This expedites new business launches, eliminates unnecessary license and permit requirements and streamlines customs processes.
Additionally, it wishes to capitalize on the African Continental Free Trade Area (AfCFTA). This aims to provide incentives for foreign investors targeting the continent’s market of 1.2 billion consumers. As such, it is presenting itself as a manufacturing and financial hub and will also help the island deepen its ties with mainland Africa, especially for its banks.
According to the SBM, one of the largest banks in the country, “Mauritius has successfully tapped into new sectors for sustainable growth”. Developments in its fiscal regime has attracted a new breed of investors. In 2018, France was the biggest source of direct investment in the island with inflows amounting to $74.2 million. It was followed by South Africa at $58.4 million and China with $48.1 million. The UK is also gradually increasing its inflows with $25.3 million.