Sven Giegold

Mauritius Leaks: New data reveals tax dodging strategies funneling money from the poor South to the rich North – EU must take action against treaty shopping in African tax havens

The international consortium of investigative journalists (ICIJ) published today its new tax scandal called the Mauritius Leaks. The leaked data reveals for the first time how multinational companies from the Northern hemisphere used the island to avoid taxes in countries in Africa, Asia, the Middle East and the Americas. Never seen details show the new dimension of tax treaty shopping offered by the law firm Conyers Dill & Pearman and major audit firms enabling corporations operating in some of the world’s poorest nations to exploit tax loopholes.

At the end of 2017, Mauritius was put on the EU “grey list” of non-cooperative jurisdictions because of its harmful tax regime called “Global Business Company” which was exempting these companies from taxes on interest, dividends or royalties. Under pressure from the EU, Mauritius amended its legislation and since January 2019 replaced it with a general regime with similar effects, giving an 80% exemption for many foreign sourced income.

Sven Giegold, Greens/EFA spokesperson in the Committee for Economic and Monetary Affairs (ECON), commented:

“We need to stop the tax avoidance industry from inventing complex schemes to help large companies to avoid taxes in poor countries.The EU must take action against harmful tax practices absorbing money from poorest countries where corrupt elites reign. The poorest nations in Africa and Asia urgently need their tax revenues to finance public services like health or education. It is unacceptable that law firms like Conyers Dill & Pearman help depriving the poorest from their income.

The EU Africa agenda will only be successful if we step up the fight against tax dumping. We call on the EU Commission to present a new action plan on tax avoidance and tax evasion including measures to combat treaty shopping.”

As agreed by its plenary assembly and to build up on past investigations, the European Parliament should urgently set up a permanent sub-committee to continue our investigations on tax evasion, tax avoidance and financial crimes.“

Molly Scott Cato, who has been a member of the Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3), adds:

“Mauritius’ claim to be compliant with international standards have been shown to be a sham. While many small African businesses are paying taxes, wealthy corporations operating in some of the world’s poorest countries are avoiding paying their fair share.

“Once again, the Big 4 accountancy firms are at the heart of this scandal, providing advice to clients on how to route profits to Mauritius to reduce their tax bills. We need to break the monopoly of these giants and regulate them to avoid conflicts of interest.

“The Mauritius Leaks confirms the global trend of granting harmful tax exemptions and special treatment for certain types of income. This leads to multinational corporations paying very low tax rates. In light of the need for tax revenue to fund public services, this race to the bottom is highly damaging.”

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