Mauritian banks are among foreign institutions that lost significant deposits as Kenyans yanked their capital from overseas markets to take advantage of a tax amnesty that ended in June.
Kenyans have wired back some Sh1 trillion from offshore accounts in the past three years, according to the Kenya Revenue Authority (KRA). The returned cash was not to be taxed, according to the amnesty.
Banks in Mauritius have reported significant cash outflows from the policy, revealing that the island nation was one of the top offshore investment destinations for wealthy Kenyans.
“With the introduction of the Kenyan amnesty earlier this year, the bank also lost some offshore US dollar deposits.
However, the Kenyan market remains a core one for the bank,” Port Louis-based Bank One says in its latest annual report.
“The financial services sector in Mauritius will continue to consolidate with the impact of … Kenya Amnesty Scheme now being strongly felt.
“The sector will have to innovate and come up with new services to stay competitive and relevant.”
The report by the bank in which Kenya’s banking group I&M Holdings has a 50 percent stake, covers the year ended December 2018.
Mauritius is seen as attractive to foreign investors because of its favourable tax system. Individuals earning incomes of up to Sh1.9 million, for instance, pay tax at the rate of 10 percent.
The island nation has also signed non-double taxation agreements with more than 30 countries. Financial services offered in Mauritius include bank deposits and investments in global assets such as equities, bonds, hedge funds and private equity. The Kenyan government first announced tax amnesty, which has since closed, in 2016.
Under the legal amendments allowing the amnesty, funds transferred back to Kenya were exempt from the provisions of Proceeds of Crime and Anti-Money Laundering Act, 2009 or any other Act relating to reporting and investigation of financial transactions.