A private equity firm established by Live Aid campaigner Bob Geldof, offering investors 20 per cent returns, set up one of its offices in tax-friendly Mauritius, according to a trove of leaked documents.
After soaring to fame in the 1980s for organising Live Aid and other anti-famine efforts, the former Boomtown Rats frontman Sir Bob Geldof shifted to the high-powered world of international finance.
In 2008, two decades after Live Aid, Geldof co-founded 8 Miles, the Africa-focused private equity firm that aimed to generate a 20 per cent return by buying stakes in African businesses, according to a memorandum from an investor.
The fund’s investments would all be on the African continent. But its London-based legal advisers asked that one of its offices be set up more than 2,000 miles away on Mauritius, according to a new trove of leaked documents.
The tiny Indian Ocean island has become a destination for the rich and powerful to avoid taxes with discretion and a financial powerhouse in its own right.
Named after the shortest distance between Europe and Africa – at Gibraltar – 8 Miles said it aimed "to deliver improved environmental, social and governance outcomes in the creation of market-leading African companies". On its website, the for-profit firm says it aims to "contribute to the economic development of the countries in which the fund invests".
But when it was looking at locating operations in Mauritius, one of the discussion points in the firm’s decision to do so was “tax reasons”, according to the email sent from London lawyers to the Indian Ocean state.
A spokesman for Geldof’s firm said its investors included international development finance institutions that “request that we consolidate their funds in a safe African financial jurisdiction for onward investment into the various target African countries. Because of its reputation, Mauritius is used by many private equity investors for this purpose.”
The spokesman said the firm’s African investments followed high standards “to create jobs, improve communities . . . and by generating increasing tax revenues which support the governments where we operate”.
The spokesman said, “Only when we sell a company will the sale proceeds be paid back into the fund in Mauritius.”
Geldof declined to comment.
Investigation
Mauritius Leaks, a new investigation by the International Consortium of Investigative Journalists (ICIJ), looks at how the former French colony has transformed itself into a thriving financial centre.
Based on a cache of 200,000 confidential records from the Mauritius office of the Bermuda-based offshore law firm Conyers Dill & Pearman, the investigation reveals how a sophisticated financial system based on the island is designed to divert tax revenue from poor nations back to the coffers of western corporations, with Mauritius getting a share. The files date from the early 1990s to 2017.
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.
Leaked Conyers Dill & Pearman records reveal that 8 Miles spent thousands of dollars on advice and services that might reduce taxes. Advisers repeatedly raised tax issues, including discussions on investment vehicles preferable for “tax reasons”, according to emails.
Under “taxation implications” in a business plan dated March 2013, Conyers employees wrote that the partnership “may require a tax residency certificate” to “benefit from the double tax agreement network”. Four of the seven African countries in which the fund’s companies operate had a tax treaty with Mauritius at the time of the fund’s investments.
Licence
The partnership eventually set up a Mauritius management company, Eight Africa Management (Mauritius) Ltd, which received a Global Business Licence, according to the 8 Miles 2017 annual report.
The licence allowed companies with operations elsewhere to be “resident” in Mauritius for tax purposes and pay its low rates – a flat corporate income tax rate of 15 per cent with foreign tax credits that can drive that down to an effective rate of 3 per cent.
In January, after years of complaints from its treaty partners and under pressure from international institutions, Mauritius overhauled the tax laws governing its offshore sector.
Gone is Global Business License 1, the form of shell company that poorer nations denounced as an exploitative tax-avoidance tool.
Bemoaning the new rules, one member of parliament blamed the Panama Papers and Paradise Papers investigations by ICIJ, among other exposés, for soiling the offshore industry’s reputation.
