After Swiss Leaks, Panama Papers and Paradise Papers, over 200,000
emails, contracts and bank statements leaked from Mauritius show how the
island nation was used by a long list of corporates to facilitate
partnerships with multinationals and, without paying any capital gains
tax, remit profits as Foreign Direct Investment (FDI) to India.
At the heart of the 18-country collaborative
investigation by the International Consortium of Investigative
Journalists (ICIJ) and The Indian Express
are data from Conyers Dill & Pearman, an offshore specialist law
firm with several Fortune 500 companies as clients, which started
operations in 1928 from Bahamas — and in 2009 from Mauritius for investments being routed to Africa and Asia.
What is Conyers Dill & Pearman, the company at the centre of the leaks?
In 1998, Bermuda-based financial analyst Roger Crombie described the
company in his book as a “full-service” law firm with an emphasis on
corporate and commercial law, and offering property, trust and
management services to companies and individuals.
READ | Via Mauritius, Religare moved funds to Singh brothers’ offshore company: records
The firm’s three founders — James Reginald Conyers, Nicholas Bayard
Dill and James Eugene Pearman — were all knighted and held public
positions in Bermuda. Over the decades, its Private Client department
helped individuals minimise their exposure to taxation, and protect
family assets, through various Trust structures. The company opened
offices across the world — in Guernsey, Cayman Islands, Hong Kong,
London and the British Virgin Islands (BVI) — with offshore entities
incorporated at these sites under an affiliate company, the Codan Trust.
Why is the Mauritius connection important?
Conyers Dill & Pearman was among those who benefitted in the
decades when there were tax breaks for companies and corporations
routing their investments to India via Mauritius, among other offshore
destinations. In 2016, India amended its Double Taxation Avoidance Agreement (DTAA) with Mauritius, and the new provisions — capital gains tax, instance — are now fully applicable.
In an interview published in the June 2019 edition of business
magazine CEO Today, Ashvan Luckraz, an associate in the firm’s Mauritius
office, said: “The challenges include the recent changes made to the
double taxation avoidance agreement between Mauritius and India, which
has brought uncertainty to the market. Furthermore, the advent of GAAR
(General Anti Avoidance Rule) in India… and CRS (Common Reporting
Standard) across major financial centers are bringing the Mauritius
corporate structure under more scrutiny.”
Explained: How did tightening of rules in India affect the firm at centre of Mauritius leaks
What did the law firm do in Mauritius before the treaty was amended?
It offers to set up funds, supply local directors, registered local
offices, secretarial and administrative services, and assist in bank
account opening/government filing.
A power-point presentation of the firm, which is part of the leaks,
claims that it can set up a GBC1 (Global Business Company, tax resident
in Mauritius) within 10 working days for an annual licence fee of
$1,750. It points out that companies registered in Mauritius had to pay
an effective income tax slab not exceeding 3% and no capital gains tax.
The presentation notes: “We act on a large number of inward and
outward investment transactions involving India and Africa (as well as
other jurisdictions) and are notably established in the traditional
markets that invest in India and Mauritius.”
In offers attractive “tax benefits and favorable fiscal regime” from
Mauritius. They claim to introduce clients and companies to a “low/zero
tax regime” where no capital gains tax would be payable in Mauritius.
What are some of the “transactions” listed by the firm in the leaks?
* Advised Vodafone Group plc on its $5.46 billion acquisition of a
33% stake in Vodafone Essar Ltd, a joint venture between Vodafone and
Essar.
* Advised on the formation of two Mauritius-domiciled investment
funds (with a Swiss Bank as manager), which are both investing in India,
in listed securities and fixed income products.
* Advised a leading venture capital fund on restructuring its
India-focused funds, which are domiciled in Mauritius and the Cayman
Islands, and advising on the formation of new funds.
How did the tightening of rules in India affect the firm?
Leaked data show that before countries like India decided to rein in
tax treaty benefits to increase their own tax base, bankers and
companies like Conyers Dill & Pearman raised red flags over
tightening regulations and compliance.
One leaked letter, received by Ashvan Luckraz, lists the concerns of
several members of the Association of Trust & Management Companies
of Mauritius. One member notes how banks like HSBC and Standard
Chartered have removed non-profitable account holders for “compliance
reasons”.
Another notes: “I believe that insane levels of responsibility and
due diligence requirements heaped onto them (the banks) has rendered the
service all but impossible, and therefore uneconomical. Every time
India or the OECD (Organisation for Economic Co-operation and
Development) clears its throat, we overreact with more destructive
regulation….”
At the heart of the 18-country collaborative investigation by the
International Consortium of Investigative Journalists (ICIJ) and The
Indian Express are data from Conyers Dill & Pearman.
