By Gyanendra Kumar Keshri, IANS,
New Delhi : Mauritius will find a mutually satisfactory solution with India to the misuse of a bilateral treaty by investors to evade taxes, a senior minister of the island nation has said.
“We have very close and special relations with India; so we are very sensitive towards these (tax evasion and round-tripping of money) concerns. We are trying to find a solution which will be satisfactory to both parties,” said Cader Sayed Hossen, Mauritius Minister for Commerce, Industry and Consumer Protection.
India has been pushing for amendments in the Double Taxation Avoidance Agreement (DTAA) to incorporate necessary changes that should allow New Delhi to impose capital gains tax on the investments routed through the African island nation.
Over 40 percent of overseas investments in India are routed through Mauritius, mostly to evade taxes.
“The DTAA has helped attract over $60 billion worth of FDI in India. It has brought business, created jobs and benefited millions of people in the country,” Hossen told IANS in an interview.
Hossen is accompanying Mauritian Prime Minister Navinchandra Ramgoolam on his official visit to India.
Between April 2000 and November 2011, foreign direct investment routed through Mauritius in India was $62.05 billion, which was 40.67 percent of the total FDI during that period.
Over 40 percent of foreign institutional investors’ money in India is also routed through Mauritius, a strategically located Indian Ocean island nation where over 60 percent of the population is of Indian origin.
While admitting that most of the investments coming through Mauritius was due to the tax benefits available under the DTAA, Hossen said it should not necessarily be seen as illicit money.
“Most of these investments come from NRIs living in different regions including the US, Canada, Australia and Europe. We know of fears that some of this money could be funds siphoned out of India, or what you call round-tripping.”
Hossen said a joint working group was looking into the matter. The group would soon give its suggestions to amend the treaty to address these concerns.
The group, comprising members from the two countries, was set up in 2006 to suggest changes in the DTAA to prevent its misuse. However, the negotiations were stalled in 2008 due to differences between the two countries, especially on the issue of capital gains tax.
India wants to amend the treaty so that it could impose capital gains tax on the investments routed through Mauritius and also curb round-tripping of money.
As per the DTAA, capital gains from sale of shares by Mauritius residents in India would be liable to tax only in their country and vice versa. Hossen said the Indian and Mauritian prime ministers have directed the authorities concerned to fast-track the negotiations.
Asked about the actual Mauritian investments in India, the minister said, “the over $60 billion worth of investments have been through Mauritius, not necessarily from Mauritius. There have been some investments from Mauritius basically in textiles. But I don’t have the break-up. In fact, I don’t see our own capital base strong enough to come and invest massively in India.”
(Gyanendra Kumar Keshri can be reached at [email protected])