As the government steps up efforts to prevent “dirty” money flowing into the country’s financial system through off shore tax havens, Mauritius has said it was willing to provide all information that India seeks.
Rama Sithanen, Mauritius’ former finance minister and chairman and director, International Financial Services Ltd, said that India has until now sent 66 requests seeking information on entities and all these have been addressed."We are serious about fighting corruption and we do not want our country to be used as black money haven and the perception that Mauritius is lackadaisical in its approach in dealing with round tripping is completely baseless," Sithanen told Hindustan Times.
India and Mauritius are expected to commence negotiations on an amended Double Taxation Avoidance Agreement (DTAA) between the two nations. Mauritius accounts for about 42% or $54.2 billion of the total $130 billion worth of FDI in the country since April 2000.
The problem has arisen because of ‘round tripping’ or “treaty shopping” by Indian entities moving money out of the country and then getting it back into India
Round tripping refers to routing of investments by a resident of one country through another country back to his home country to avoid paying capital gains tax.
Sithanen said that Mauritius is keen to woo Indian companies to use the island nation as an international financial centre. In recent months, Singapore has trumped Mauritius as the most preferred international financial centre for Indian companies.
A joint working group of comprising representatives of the Indian and the Mauritius government was constituted in 2006 to address these concerns.
India has proposed source based taxation of capital gains from alienation of shares as a possible solution to the problem of abuse of treaty.
The talks of revising DTAA were stalled in 2008 as Mauritius was not willing to allow India to tax capital gains at source.