But more recently, and in more realistic products, Mauritius has also been ahead of the game. The island caught the offshore services bug in the 1980s and has since become a centerpiece of the burgeoning Indian Ocean trade corridor, acting as an offshore destination for companies engaged in trade between India, China, Africa and the Middle East. Increasingly, and much to the chagrin of Indian authorities, it has also been a center for money round tripping from India back to India, and China back to China. Now, at US$39 billion Mauritius is India largest single source foreign investor, almost half of total investment flows and in 2008 Mauritius investment in China accounted for 1.62% of the total Chinese investment volume (USD 1.5 billion). Access, and taxless The key to Mauritius success, and particularly its appeal to Chinese entrepreneurs, has been a series of trade agreements signed across four continents. The island is a member of COMESA (the Common Market for Eastern and Southern Africa) and SADC (the South African Development Community), two of the largest and most successful trade blocks in Africa, which gives businesses based on the island easy access to economies across Eastern Africa. The island also has agreements for the tariff free export of textiles to Europe and Africa, a boon to Chinese textile firms which have long had tariffs levied against them in those areas. Finally a series of 28 double taxation treaties, most notably with India and China, have eased the process of doing business between the countries, and have caused plenty of controversy. The access to Eastern Africa is also a protection against risk. In an interview with China International Business magazine, Mark Fung of the China Africa Development Fund noted that the fund could protect against instability in places like Zimbabwe (which was caught in an inflationary crisis shortly after the fund investment in the country chrome sector), through incorporating the involved business in Mauritius, and maintaining all financial transactions with the Mauritius corporation. Mauritius, in itself, is among the most stable countries in that part of the world. Ranking #1 on the Mo Ibraham index of African Governance, 17th on the OECD doing business index and #42 on Transparency International corruption perception index. But one country has it out for Mauritius. The Indian government has accused Mauritus of helping some Indian companies evade taxes through investing money into Mauritius, and then reinvesting it in order to take advantage of the lower taxes. According to the Double Taxation Avoidance Treaty signed between India and Mauritius in 1983, any capital gain made on the sale of shares of Indian companies by investors resident in Mauritius would be taxed only in Mauritius and not in India. For the first ten years the treaty existed only on paper, as foreign companies were not allowed to invest in Indian stock markets until 1992. In 1992 Mauritius also passed a regulation allowing foreign companies to register for the purpose of investing abroad. Though the unusually high level of investment from Mauritius into China would seem to indicate that a similar situation is occurring here, China has looked on the money going to and from Mauritius favorably, probably in no small part because it eases China involvement in Africa. Mauritius is a regular stop over for China leaders, just as China is a one of the primary targets of Mauritius investment recruiting. Chinese companies such as privately owned Huawei Technologies and the Shanxi Tianli Group or the state-controlled Taiyuan Iron & Steel Group (TISCO) and Shanxi Coking Coal Group are investing in Mauritius. One of China first economic zones in Africa is a huge USD 750 million, 521 acre project just 10 minutes from Port Luis, the island capital and largest city. According to The Prime Minister of Mauritius, Navin Ramgoolam, this zone should create 42,000 new jobs. There is talk of granting Chinese citizens visa-free access to the island in the near future. On Good Terms The question of whether Mauritius plays unfair with its taxes is still a matter of some debate. They seem to have won over everyone that counts though. The Organisation for Economic Co-Operation and Development (OECD) put Mauritius on their white list of jurisdictions that have implemented the internationally agreed tax standard. The Tax Justice Network, which has a much more dour view towards low tax jurisdictions said that the island has an pacity score of 96 out of a maximum of 100. The argument about unfair taxation rests on the fact that a Mauritius company can both be a local company, subject to double taxation treaties, and an offshore company, subject to a 0% tax rate, says Durga Rao Vanyam a lawyer in Madras. He says though that the Indian government could easily crack down on this form of tax avoidance if it were to tax profits of foreign firms operating in India, a practice fairly common in China. Whatever the fairness of Mauritius tax regime, it has clearly gained favor with foreign companies, as the island has investments by 160 major multinationals and all of the Big 4 accounting firms. With new direct flights between China and the island you can expect more visitors coming for business and pleasure.
