Mauritius wants revised tax treaty to override domestic laws

"We want earlier resolution because we do not want uncertainty, as instability and uncertainty is not good for both countries," Mauritius Minister of Foreign Affairs, Regional Integration and International Trade, Arvin Boolell, told a press conference here.

India has been exerting pressure on Mauritius to revise the Double Taxation Avoidance Agreement (DTAA) since 2006 to curb the menace of tax evasion by companies and foreign financial institutions registered in the island nation.

Although, the joint working group on the tax treaty have met seven times so far, no substantial progress has been made due to Mauritius' "unwillingness" to bring in safeguards to prevent the misuse of the tax treaty.

The joint panel would be next meeting from August 22-24 to iron out the differences related to DTAA revision.

"Once 'Limitation of Benefit' clause is embedded in the taxation treaties, we expect it to prevail and no domestic legislation should over-ride the treaty," Boolell said.

India is looking to implement General Anti-Avoidance Rules (GAAR) to prevent abuse of the tax treaty.

Boolell, who is on an official visit, met Prime Minister Manmohan Singh, senior ministers and Planning Commission Deputy Chairman Montek Singh Ahluwalia and discussed various issues, including DTAA revision.

On the issue of taxing capital gains by the island nation, Boolell said Mauritius would not impose any such levy and added: "Article 13 is sacrosanct".

Article 13 refers to the clause in DTAA, whereby, a company can avail the benefits of the treaty and pay capital gains tax only in Mauritius.

Companies are misusing this clause to avoid taxes since Mauritius does not charge capital gains levy. MORE