(3 minutes read)
- Lesotho has finalized a new tax treaty with Mauritius, allaying fears in the southern African nation that multinational corporations were dodging paying taxes through shell companies in the island
- The new agreement, which sets out the taxation rules for companies that run Lesotho businesses from Mauritius, came into effect earlier this month
- Many firms took advantage of Mauritius’ tax rate – often as low as 0% – to pay little or no tax at all, though the intention of such arrangements is to avoid double taxation of taxes
Lesotho has finalized a new tax treaty with Mauritius, allaying fears in the southern African nation that multinational corporations were dodging paying taxes through shell companies in the island. The new agreement, which sets out the taxation rules for companies that run Lesotho businesses from Mauritius, came into effect earlier this month.
It replaces a 1997 treaty that Lesotho authorities have in recent years, which may be termed as  unfair. Lesotho, a tiny mountainous kingdom of two million people surrounded by South Africa, is rich in diamonds but has a high rate of poverty. Almost half the population lives below the poverty line. Tax treaties signed between Mauritius and other countries, especially those in Africa,  have been subjected to scrutiny by various agencies including journalists .
In the meantime, a collaboration of journalists from 18 countries’ investigation had revealed how Mauritius became the go-to destination for corporations doing business in Africa.   They can reduce tax payments due to some of the world’s poorest countries. Mauritius has a reputation of a tax haven where bilateral agreements signed with neighboring African nations. Many firms took advantage of Mauritius’ tax rate – often as low as 0% – to pay little or no tax at all, though the intention of such arrangements is to avoid double taxation of taxes. Lesotho hopes the new treaty will increase tax revenue, including from foreign corporations that chose to form shell companies in Mauritius solely to benefit from the island’s low tax rates.
