With regard to the International Agreements Ratification Act No. 34 of 2016 (the Act), TDCs fall under the category of “bilateral treaties” and do not require ratification by Parliament, as opposed to “international agreements”. It is therefore not necessary to submit a request for termination of the Treaty to Parliament. The termination procedure set out in the DTA itself applies. But what is it? How do they work? And why are they so controversial? The agreement came into effect on June 15, 2012 and covers revenues from a number of specific sources, such as business income, dividends, interest and royalties. The current agreement also provides for exclusive taxation in the country of residence of the income reference. In the Cabinet statement, the government stated that Zambia does not retain the tax rights to tax dividends, interest and royalties payable in Zambia to residents of Mauritius. It is not clear whether the declaration should refer to administrative costs where a reduced rate of 0% applies, as the contract provides that Zambia will levy a withholding tax on dividends (5%), interest (10%) and royalties (5%). I think what Mauritius should do are two things. We clean. That is to say, to accept that if there are reasons to have financial centres, the dimension of tax evasion must disappear. Then also with a view to diversifying its economy; Mauritius is still a developing country and must look for alternative development strategies.
What is unusual for a low-tax jurisdiction is that Mauritius has a significant number of double taxation treaties. In general, contractual benefits are available to all Mauritian companies except “international”. All Mauritian treaties are based on the OECD Model Treaty and contain information exchange clauses. However, exchanges are limited to questions relating to the functioning of the Treaties themselves. The treaty with India, which had underpinned Mauritius` emergence as the dominant channel for foreign direct investment in India, was attacked by Indian tax authorities in 2002 for alleged abuses by India-based investors. In October 2006, the Government of Mauritius announced that it would tighten the rules for issuing certificates of tax residence; in the future, it would only issue them for one year at the end. At that time, various other restrictions were imposed, including on the issue of applications for a Category 1 global business license Finally, in May 2016, a protocol for the Indo-Mauritian tax treaty was developed. Since April 1, 2017, the beginning of the 2017-2018 fiscal year, capital gains on shares of companies resident in India are no longer exempt from tax. However, until March 31, 2019, capital gains tax will be levied at 50% of India`s national tax rate. The DTA between Zambia and Mauritius obliges the contracting parties to terminate the contract no later than 30 June of the calendar year, provided that the contract has been in force for at least five years. Upon termination, the contract will no longer apply to Zambia on the last day of the calendar year and to Mauritius on 1 July of the following calendar year.
It is a little different between developed countries. In this case, the possibility of double taxation is higher, as investment flows are much more complex. So I think there`s evidence that contracts work. But for an African country, the evidence is not there. One of the reasons we focus on developing countries is that it is less clear what they get from tax treaties. Tax avoidance, on the other hand, benefits from the way the law is drafted. For example, a tax treaty may be used to obtain a benefit that was not the original intent of the contract. The tax administration, on the other hand, cannot do anything in the short term because the taxpayer has a legal remedy.
In the longer term, the law must be changed. .