ActionAid: Deloitte helping business drive down African tax bills
Charity says double-taxation agreement between Mozambique and Mauritius means both countries lose revenue
DELOITTE has been accused of helping large multinational companies avoid paying taxes in some of Africa’s poorest nations.
Charity ActionAid has obtained documentation in which the firm has advised businesses on how to legally avoid paying tax Africa by structuring their investments via the tropical island of Mauritius.
The document, Investing in Africa through Mauritius, illustrates how by investing in Mozambique via Mauritius, companies can expect double-taxation measures to ensure their tax is kept low.
Typically, a foreign business investing in Mozambique would have to pay a 20% withholding tax on dividends flowing out of the East African country. Similarly, a sale of a company’s Mozambican investment would attract 32% capital gains tax.
However, the Deloitte document shows investing through a holding company in Mauritius the withholding tax is capped at 8% and capital gains tax pushed down to nil. It adds Mauritius is entitled to tax the holding company’s profits at 15%, but in practice it rarely occurs. Any tax liability on the island by a foreign tax credit, in place to ensure double taxation does not tax place after Mozambique’s levies.
ActionAid Tax Policy Adviser Toby Quantrill said: “Tax revenues are desperately needed to meet peoples most basic needs and to move countries away from aid dependency.
“Big businesses have an important role to play in economic development in poor countries. But they also have to act in a socially responsible way.”
A Deloitte spokeswoman said: “It is wrong to describe applying double tax treaties, such as the treaty between Mauritius and Mozambique, as tax avoidance. Such Treaties are freely negotiated between the governments of the countries involved.
“Double-tax treaties exist to enable the countries concerned to strike a balance between the need to encourage investment, including cross-border investment, to raise tax revenue, and to work together with other countries who have the same legitimate concerns to raise revenue and promote business.
“The absence of such treaties could result in a reduction of investment, and less profit subject to normal business taxes in the countries concerned. Any discussion of tax treaties by tax professionals would typically be around the technical and administrative aspects of the treaties and not an expression of favour of any particular country at the expense of any other country.”