Mauritius – We Are Not A Tax Haven (FATCA Post)

Although most countries have not yet signed on to FATCA – the Foreign Account Tax Compliance Act – more and more countries are in serious negotiations with the U.S. Treasury. Designed to combat tax evasion and raise tax revenues, FATCA requires foreign financial institutions to review accounts and report those with ties to the United States. The law is scheduled to be implemented in 2014.

FATCA has been controversial since enacted several years ago. While it will certainly identify hidden offshore accounts, foreign banks and hedge funds say the cost to implement is huge. Many such institutions are simply closing accounts that belong to Americans. Other critics say that only a small percentage of foreign account holders are attempting to evade taxes. They say most people simply don’t understand the complex reporting requirements. (The government’s GAO and the IRS National Taxpayer Advocate are both critical of the IRS’ education and outreach efforts.)

Mauritius is the one of the newest countries to signal its intent to cooperate with FATCA. Although not very popular among Americans, Mauritius does have a vibrant offshore banking business. Switzerland and the Caribbean nations seem to be the destination of choice of Americans, Cyprus was the destination of choice of Russians and Mauritius is popular among Indians. That could have an impact on the millions of Indian Americans, many of whom are American resident aliens (green card holders) or dual nationals.

Indian tax authorities have long been concerned with their citizens hiding money in Mauritius. According to a report carried by the Wall Street Journal, Mauritius central bank governor Rundheersing Bheenick disagrees. “Mauritius stoically shrugs off these attacks as it does not practice a culture of opacity. Mauritius has always been more than willing to share information with the banking and tax authorities of partner countries,” said Bheenick.