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| Mauritius hopeful of positive results | | We can find a mutually satisfactory solution that would address concerns on alleged misuse: PM |
| BS Reporters / New Delhi Feb 09, 2012, 00:37 IST |
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 As India and Mauritius are engaged in revising their tax treaty to prevent misuse by third-country players, the island nation on Wednesday assured India Inc it did not want to be a route for money laundering and hoped mutually satisfactory solution could be found in negotiation.
However, Mauritius did not divulge whether it was agreeable to India’s demand that New Delhi should be allowed to impose capital gains tax on investments routed through the country.
“We believe we can find a mutually satisfactory solution and a win-win package that would address concern about alleged misuse (of the tax treaty),” Mauritius Prime Minister Navincha-ndra Ramgoolam said at a meeting with Indian business community, organised by the Federation of Indian Chambers of Commerce and Industry, the Confederation of Indian Industry and the Associated Chambers of Commerce and Industry of India.
Yesterday, Ramgoolam and Prime Minister Manmohan Singh reviewed the status of negotiations on the revised Double Taxation Avoidance Agreement (DTAA) and directed officials to fast-forward talks in this regard.
India and Mauritius had one round of talks in December to revise the treaty after similar negotiations were stalled in 2008. A joint working group was constituted in 2006 to negotiate DTAA with Mauritius and its last meeting was held in 2008. The changes in the treaty would change the way foreign investors structured their investments in India.
The negotiations were stalled for several years, as Mauritius was not ready to revise the DTAA, fearing it would affect interests of its investors.
The review is aimed at preventing evasion of taxes, as over 40 per cent of the total foreign direct investment in India is made through Mauritius, a low-tax jurisdiction. Also, over 40 per cent of foreign institutional investor money is understood to be routed through the island nation, much of which is poured by third-country investors.
Officials had earlier said India would pitch for imposition of capital gains tax on investments routed through Mauritius. India wants capital gains tax should be imposed where source originates, and the source is India because gains are in India. According to the present treaty, it is with the resident country, which is Mauritius. It does not impose the tax.
Ramgoolam said the DTAA had served both countries well. “The India-Mauritius Double Taxation Avoidance Convention has seen, we feel, an unfair criticism, despite the fact that the legitimacy of the treaty has been upheld time and again in legal instances ... We also do not want to have round tripping, money laundering,” he said.
He said avoiding misuse of the treaty was important for Mauritius, as well.
“We have a clean image... So, it’s important for us, as well... I think the latest Supreme Court judgment in India on the Vodafone case said it very clearly... There were some concerns relating to the alleged misuse of the treaty,” he said, adding assurances had been given to them by India that nothing would be done to hurt the economic interest of Mauritius.
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