JF Exclusive: Mauritius Leaks name Tanzania companies in tax avoidance

Invisible

Robot
Feb 11, 2006
9,110
2,000
9251A090-602A-488E-9DCA-6067552C1C0A.jpeg

By JF Reporter

FORGET about Panama and Paradise Papers, now it is Mauritius Leaks, which have emerged to contain four - at least for now, Tanzania’s companies that have done businesses or operating huge transactions in the tiny Indian Ocean Island in Africa.

Three months investigations have revealed that Tanzania, according to various impeccable sources, is estimated losing USD.211 million to USD.370 million a year due to transfer pricing and other business deals done in connection with tax avoidance; especially doing businesses with other related companies in tax haven countries, now including Mauritius.


Mauritius Leaks is a cross-border investigation into how one law firm on a small island off Africa’s east coast helped companies leach tax revenue from poor African, Arab and Asian nations.

Led by the International Consortium of Investigative Journalists (ICIJ), the investigation is a collaboration by 54 journalists in 18 countries.

More than 200,000 documents from the Mauritius office of a prestigious offshore law firm, Conyers Dill & Pearman, are at the heart of the investigation. ICIJ corroborated company information from the leaked documents with data in the Mauritius corporate registry and the Financial Services Commission's register of licensees.

The documents offer a rare window into corporate tax avoidance in countries in Africa, the Middle East and Asia.

The documents include emails, contracts, some banking practices, and business plans provided by some of the world’s biggest players in finance and law, including KPMG and the London-based multinational law firm Clifford Chance. Others are PricewaterhouseCoopers, Deloitte and EY, all have offices on Mauritius.

Those tax consultancy companies they reveal attempts by corporations and individuals to exploit tax rules that allow them to avoid taxes of such countries as Tanzania, Egypt, Mozambique and Thailand.

The island, which sells itself as a “gateway” for corporations to the developing world, has two main selling points: bargain-basement tax rates and, crucially, a battery of “tax treaties” with 46 mostly poorer countries. Pushed by Western financial institutions in the 1990s, the treaties have proved a boon for Western corporations, their legal and financial advisers, and Mauritius itself — and a disaster for most of the countries that are its treaty partners.

“What Mauritius is providing is not a gateway but a getaway car for unscrupulous corporations dodging their tax obligations,” said Alvin Mosioma, executive director of the nonprofit Tax Justice Network Africa.

Many countries refers “tax avoidance” as the use of perfectly legal methods of arranging one’s affairs so as to pay lesser tax. It involves utilizing loopholes in tax laws and exploiting them with some legal parameters.

In Tanzania, although it is not illegal to operate and do business with other countries, including those with tax shelters; like Mauritius, but companies, individuals, institutions and other entities, are using it to avoid taxes in their mother country.

Other countries known to be tax havens are Dubai, Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, The Isle of Man, Lichtenstein, Monaco, Panama, and St. Kitts, and Nevis.

Tanzania Revenue Authority (TRA) said the East African emerging economy; Tanzania does not have any tax related agreements with Mauritius or any tax haven countries.

“There is nothing wrong doing businesses with offshore countries, laws of our land doesn’t block anyone who wants to open and operate legal businesses in any country; be it tax haven or others,” said TRA to ICIJ.

TRA is aware of fully aware of the offshore businesses and that it has made attempts to control transfer pricing by requiring companies to verify that the related-party pricing is at arm’s length and supported by genuine transfer pricing documentation.

“The TRA is aware of the problem of Tax avoidance and noncompliance to tax generally and has been addressing these problems most of the time in its corporate plans and now there are some crucial measures to lessen the practice,” said TRA.

TRA is said to have significantly capitalized in staff training and capacity building especially in specific areas such as forensic audit skills in order to monitor mega local companies as well as multinationals companies (MNCs). This is aimed at tackling the challenges associated with tax planning and avoidance.

However, Tax avoidance has remained upright till now despite all the above efforts by tax authorities.

Dr. Lenny Kasoga, an international economist, former University of Dar es Salaam lecturer, said the main purpose of local companies to operate other like businesses in offshore countries is to avoid “high taxes” in their home countries, which in a way, stalling national growths.

“Some companies use it to minimize their tax bill by artificially inflating input costs in high tax countries and reporting (and paying tax) profit in low tax countries,” Dr. Kasoga, who has done some thoroughly researches on international taxes,” noted to ICIJ.

Governments around the world are struggling with the issue of transfer pricing. This often leads to opportunistic and, ultimately self-defeating competition among countries in setting company tax rates.

Internationally, there has been a rapid introduction of what is called “new transfer pricing regulations” from the Organization for Economic Cooperation and Development (OECD), including the Base Erosion and Profit Sharing initiative (BEPS), which Tanzania has embraced.

“If our poor countries doesn’t executing standardized international system of tax regimes, there will always be room for tax rate arbitrage because of the awkwardness incentives offered up by taxing profits rather than production,” said Nyaronyo Kicheere, a Dar es Salaam based lawyer.

Kicheere who is a high court counsel told ICIJ that poor countries will remain poorer if they continue embracing home based companies to have mother-companies offshore, and depend only in collecting Pay As You Earn (PAYE) taxes from employee. “There should be some mechanism to combat rampart resource shifting,” he hinted.

A Dar es Salaam based tax consultant, Maguha Magesha said it is high time now Tanzania refrain from using politicians in tax matters, and usefully engage its tax experts in utilizing laws which enforce the willingness for its people to pay their obligatory taxes.

Magesha advised the country to use The African Tax Administration Forum (ATAF), which Tanzania is a member, to exchange notes on better practices instead of “fighting with taxpayers.” He said there is need to improve good governance so that the legitimacy of the government is enhanced, adequate resources need to be provided to promote voluntary taxpayer compliance.

He said, there is a need to have Tax Laws free from ambiguities in that they should not create gaps that will attract more tax avoidance acts as it is with transfer pricing provision under the Income tax Act.

ATF is an international organization which provides a platform for cooperation among African tax authorities.

The companies

It has been revealed that at least four companies in Tanzania are in Mauritius Leaks – for now we are publishing one company, while continuing to track others.

All those companies, in different times from 2014 to 2017 has been engaged in various businesses with Mauritius entities; including contracts – some never sealed, communications (mostly, emails), banking practices and transactions – according to documents seen by our investigators.

One of those companies is Ubongo Group, Africa’s largest producer of educational children’s television programs, whose shows reach 11 million households in 31 countries. Eyeing an expansion, the Dar es Salaam-based company predicted a 35-fold increase in revenue over six years, according to a financial model.

In 2015 KPMG provided advice on the “economical means of Ubongo Mauritius extracting profits from Ubongo Tanzania,” according to a Ubongo planning document. One KPMG suggestion was that the Mauritius subsidiary lend money to the Tanzanian one, so that the money used to repay the loan would be taxed at 3% in Mauritius rather than 30% in Tanzania.

Ubongo which its mission in Mauritius was never sealed, told ICIJ that it took advice from KPMG about how to grow across Africa, but did not follow through with the plans or recommendations. “We cancelled the investment round before receiving any funds, and instead re-registered as a non-profit organization to better align our funding and structure with our mission,” Ubongo told ICIJ.

Ubongo said KMPG made recommendations for creating a parent company in Mauritius so that the company could raise investment and grow, but never followed through with the restructure per those recommendations and instead re-registered as a non-profit.

“Tax efficiencies refers to not incurring double taxation. It does not mean tax evasion. Taxes are always paid in country of origin (Tanzania, Kenya, etc.) however Mauritius limits additional taxes to be paid on top of those taxes already levied. So taxes are still paid in Tanzania, but there is a limited additional tax levied by Mauritius. I would suggest that you talk to KPMG directly. They can explain these recommendations and the double taxation issues,” Ubongo noted further.

“We never transferred any shares nor have we ever "extracted profits" from Tanzania. All of our audited accounts clearly show this.”

“Our aim is not to generate or extract profits. Hence why we became a non-profit to fully align around that,” added Ubongo.

Ubongo said, they initially started the company as a for-profit social enterprise (founded in 2013 in Tanzania and the US) and were seeking investment from foreign impact investors to scale across Africa. Investors “suggested that we open a parent company in Mauritius followed by subsidiaries in various new countries where we expand to,” Ubongo said in response to questions. “However, during the course of that investment round they decided to change paths and re-register as a non-profit to better pursue our mission; an institution helping children to learn and brain sharpening.”

KPMG Tanzania avoidance

KPMG Tanzania did not comment on specifics, despite three visits to their office in Masaki, Dar es Salaam. Each time ICIJ reporter was told by personnel at the reception; “our bosses are so busy, could you write an email.”

The email contained questions was written and sent to one of firm’s partner and senior advisor on July 02, 2019 (1043hrs) but has not been acknowledged nor answered.

ICIJ decided to contact KPMG International based in Amstelveen, Netherlands and answered all questions in one paragraph:

“Organizations engage our tax professionals to help ensure their companies are compliant with relevant legal, regulatory and professional requirements and we take great pride in our ability to deliver. While we do not comment on specific client matters, we can say that our tax professionals act lawfully, with integrity and in line with our Global Responsible Tax Principles. We demand this from our own people and we expect it from the wider stakeholders we work with.”

The government of Tanzania

The government of Tanzania, through Ministry of Finance said the country has few entities and individuals who are involving in tax avoidance compared to other countries, although he didn’t deny the problem in Tanzania.

Country’s ministry said TRA has refined analytical tools to detect and confront taxpayers using tax avoidance outlines. TRA and other state organs will always investigate and challenge systems and that will litigate cases up to the proper court if needed.

“If you involve in a tax avoidance structures, you are exposing yourself to major overheads, often greater than the potential tax gain. You should also be aware of the disruption caused by our institutions inquiries, potential litigation and prolonged uncertainty about the outcome,” the ministry said.

Mauritius hits back

Mauritius' Minister of Financial Services and Good Governance, Dharmendar Sesungkur, who oversees the country's offshore sector, said that ICIJ’s information was "outdated". The minister said that independent organizations, including the World Bank, recognize that "Mauritius is a cooperative and clean jurisdiction that has made significant progress in adhering to international standards.

The Panama Papers

At least 45 Tanzanian businessmen were exposed by the Panama Papers investigation that details the names of people and related companies with offshore accounts in territories that are known as tax havens.

Those included well-known businessmen and politicians. Their details were captured in both the Panama Papers and Paradise Papers, millions of documents leaked from the custodians of the information about the shadowy records of some of the world’s mighty leaders and business multinationals.

Among those names were business mogul, Rostam Aziz, Quality Group Limited CEO Yussuf Manji, politician and Member of Parliament for Morogoro – through ruling party, CCM - Abdul-Aziz Mohamed Abood, and the head of Kilimanjaro Safaris Eric Pasanisi.

Members of the global elite to figure in previous offshore leaks included a close friend of Russian President Vladimir Putin; football player Lionel Messi; actors Jackie Chan and Emma Watson.

Screenshot 2019-07-23 at 07.42.52.png

Screenshot 2019-07-23 at 07.43.57.png

Screenshot 2019-07-23 at 07.44.42.png


81433163-746C-43FC-9714-B63146941D9F.jpeg

4E907C5D-F407-4914-9B6E-C34DAD3D3403.jpeg

399E74BF-D699-4B7C-8D8D-B6A1BEFC1588.jpeg
 

Rogojin The Idiot

JF-Expert Member
Jul 25, 2017
1,436
2,000
Thanks Invinsible. Shida yetu wamatumbi ni hiyo lugha. Tutaanza kusugua vidole chini maana hatutaweza kusimulia huu umbea mpya mjini.

Over all, Mauritius is the safe haven for companies avoiding taxes. Some few have relocated to that destination. Many more are planning to do so.
 

Invisible

Robot
Feb 11, 2006
9,110
2,000
Where are their names? Name them please! And am sure 99% are from their beloved Chama Cha Makinikia
Heartfully I thank you for this such an eye opener thread. Hii post is headache kwa wenye kuhusika na huu mchongo.

Please where are the names dude?

One has been named (Ubongo) and given an holy chance to reply, others are coming very soon...
 

Ishimba

Member
May 19, 2017
22
75
Been reading this great piece, hakika JF ndiyo "gazeti" lililobaki kuibua hoja, kutupa nafasi nasi kuchangia bila woga. Mnastahili pongezi sana.

Lakini bado kazi moja, tuleteeni habari alipo Azory Gwanda, maana hata waajiri wake wamemtelekeza. Hawamzungumzii tena, wamewaachia wazungu wanahangaika. Congole Max na timu yako
 

Kamanda

Senior Member
Dec 5, 2007
148
250
Kazi nyingine ya uhakika ya JF. Nawakubali sana. Mungu awaliende,

Naamini mna wahariri makini, ingawa majina yao hatuyaoni humu, wako na majina bandia.

JF ni pekee pa kujidai, hakuna maelezo wala ikulu ya kukukaba koo.

Ngoja nisubiri majina ya wengine. Aminia wanangu
 

Kamanda

Senior Member
Dec 5, 2007
148
250
Been reading this great piece, hakika JF ndiyo "gazeti" lililobaki kuibua hoja, kutupa nafasi nasi kuchangia bila woga. Mnastahili pongezi sana.

Lakini bado kazi moja, tuleteeni habari alipo Azory Gwanda, maana hata waajiri wake wamemtelekeza. Hawamzungumzii tena, wamewaachia wazungu wanahangaika. Congole Max na timu yako
Kweli umesema, hivi Citizen na Mwananchi wanafanya nini kuhusu Azory? Kama wamelala namna hii. Wameacha kumsaka na kazi hiyo inafanywa na kukomaliwa na wazungu. "Tanzania nakulilia"
 

Toa taarifa ya maudhui yasiyofaa!

Kuna taarifa umeiona humu JamiiForums na haifai kubaki mtandaoni?
Fanya hivi...

Umesahau Password au akaunti yako?

Unapata ugumu kuikumbuka akaunti yako? Unakwama kuanzisha akaunti?
Contact us

Top Bottom