In its bid to plug a tax loophole foreign investors use by routing money through Mauritius, India on Saturday formally took up the issue of amending the Double Taxation Avoidance Treaty (DTAT) with the island nation.
After his meeting with Prime Minister Dr. Navinchandra Ramgoolam here, External Affairs Minister S. M. Krishna said: “It (treaty) did come up for a discussion. We’ve agreed that more discussions need to take place on this particular point.” The matter would now be taken up between the officials of the two nations, he added.
Sources said Krishna also raised the issue with Mauritius vice-PM and Minister of Finance Pravind Kumar Jugnauth.
Hindustan Times had first reported that concerned over reports of tax evasion and other manipulations, India had been asking Mauritius — through which 43 per cent of India’s foreign direct investment is channelled — to “suitably modify” the DTAT of 1982.
India has recently offered even “monetary compensation” to Mauritius of offset its losses in case the modifications were brought about to incorporate stronger anti tax abuse measures, the sources added.
While India has a DTAT with around 65 countries like the US, UK and Germany, Mauritius has become the most preferred route for Foreign Direct Investment inflows. Hundreds of foreign and Indian firms register here and indulge in “round tripping”. Between April 2000 and March 2010, India received FDI inflow of over Rs 500,000 crore, of which Rs 210,000 crore came via Mauritius.