“It is unfortunate that there is a wrong perception about Mauritius in India with regard to it being a tax haven or a post-box economy,” Standard Chartered’s Mauritius CEO Sridhar Nagarajan told The Economic Times.
“But, as a major international bank operating here, we can tell you that the regulations are very strict here and even opening a bank account is very difficult when compared to many other jurisdictions in the world,” he said in the report.
According to The Economic Times, Mauritius is thought to be a haven for foreign direct investment (FDI) and tax fraud because many businesses that have established investments in India, also have addresses in Mauritius.
Despite this, the report says that the harmful perception is wrong and can be attributed to the fact that many are not knowledgeable about the island’s investment process and permissions. In Mauritius, investment management companies often lend their addresses to clients, a practice which helps the firms easily crackdown on “wrongdoings.”
Regulations on foreign direct investments are very strict and trusted, officials say.
“There is a very good mechanism in place to check the round tripping and it cannot be possible that such a huge amount of FDI that has been routed to India through Mauritius has all been round tripping,” Nagarajan added.
He also said that Mauritius is a common home-base region for investors and companies as the business process, tax benefits and general location are ideal. Round tripping — or tax evasion by way of the Mauritius-India double taxation avoidance agreement — is something that is hard to achieve because of tight regulatory checks, the report noted.
Anthony Leung Shing of PricewaterhouseCoopers Mauritius said in The Economic Times report that the region has long done away with the ‘letter box address model.’ Investment companies now set up huge businesses, he said, and hire a large amount of employees that route funds through Mauritius.
“So what is happening is that we have moved up the value chain from being a place for mostly holding companies to provider of various services, which include functions like treasury functions, procurement, administration, accounting, payroll etc,” he told The Economic Times.
Any company with an investment foundation wishing to do business from Mauritius — and from many other countries — must already have a strong business, infrastructure and employee presence, The Economic Times reported.