The bilateral tax treaty Senegal had with Mauritius ended this month, after claims that the country lost $257 million in tax revenue over 17 years due to the “unbalanced” effects the island’s tax haven status has on developing countries.
For Senegal, one of the main reasons to exit the treaty was to protect their vested interests in their oil and petroleum sectors which have high prospects due to recent oil and gas discoveries: initially estimated at 563MMbb (billion barrels), according to Joseph Medou, the General Director of Exploration and Production of PETROSEN, Senegal’s state-owned hydrocarbons company.
Before the peak of the coronavirus in January 2020, the price of oil was about $56 per barrel. As of April 2020, crude oil prices had dropped to just $16 per barrel, according to the U.S. Energy Information Administration. With natural resource companies having a history of using offshore companies in Mauritius to avoid taxes, plus the economic pandemic related downturn, Senegal can not afford to take any further losses, officials familiar with the matter have explained.
Investigations conducted by the International Consortium of Investigative Journalists into Mauritius’s tax haven status revealed that some international agencies avoided paying up to $8.9 million in taxes to Senegal by way of Mauritius.
This year, Senegalese President Macky Sall reported that pandemic related limitations would cause a decrease in the country’s GDP by roughly 5 per cent. Drilling at Senegal’s oil and gas sites was expected to begin in 2023 at the cost of an estimated $4 billion. Still, given the global economic downturn, the future of the project and its start date is anyone’s guess.