India gets 43 pc FDI through Mauritius route | business | Hindustan Times
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India gets 43 pc FDI through Mauritius route

business Updated: Apr 19, 2009 15:21 IST

Mauritius, considered a tax haven for Global Inc., accounted for 43 per cent of cumulative foreign fund inflow into India, even as money parked overseas for tax avoidance has become an issue in the Lok Sabha polls.

Of the total $81 billion FDI that has come into India since April 2000, $35.18 billion was routed through the Mauritius route, according to figures available with the Department of Industrial Policy and Promotion.

The Organisation of Economic Cooperation and Development (OECD) which has drawn a global list of tax havens, has not included Mauritius among the preferred jurisdictions of the tax get-aways.

However, the tiny nation in the Indian Ocean, which levies effective corporate tax of less than three per cent, is considered the best place for avoiding taxes.

Though India has a Double Taxation Avoidance Agreement with about 65 countries like the US, UK, Japan, France, and Germany, it is Mauritius which is the most preferred route for FDI inflows.

Even though India offers several exemptions and reliefs to companies on the corporation tax of 30 per cent, the effective rate in the country for the corporate is no less than 20 per cent. "So much tax arbitrage makes sense for companies to go and register themselves in Mauritius," an industry official said.

"Tax concessions have been a major driver for companies routing (investments) into India through Mauritius. There is corporate tax of 15 per cent and they give deemed credit," Ernst and Young's Tax Partner Vishal Malhotra said, adding that the effective tax comes to around 3 per cent.

Huge money parked in tax havens has been made an election issue by the BJP which has said that if voted to power it would bring the money back to the country.

The Left has also been talking about the tax havens and the black money.

Both BJP and Communist Party of India (Marxist) have claimed that $1.5 trillion has been kept outside the country. After Mauritius, India received highest FDI of $7.59 billion from the US since 2000, followed by UK ($7.72 billion) and Germany