Financial Services: The fate of the Mauritian Offshore in the Hands of Indian MPs

Concern is growing in the financial services sector and also within the Mauritian government. The origin of this spirit, the possibility that the General Anti-Avoidance Rules (GAAR ) rendered obsolete provisions of the Convention on the Elimination of risk of double taxation between India and Mauritius.

The provisions referred to relate to the mechanism that has so far allowed investors to pay taxes under the bilateral treaty that Mauritius and India signed in 1983.

The GAAR is a mechanism developed as part of Direct Taxes Code (DTC) Bill, Bill tabled in Lok Sabha, Indian Parliament, in 2010 and aims to streamline the tax system in India. DTP gives absolute power to the Commissioner of Income Tax of India. Under certain conditions, it may order that the provisions of the GAAR can be consigned to those of an earlier treaty relating to double taxation. 

In short, India wants to close all possibilities of tax evasion including those that could arise from provisions of a treaty for the elimination of double taxation.

The DTA has certainly not yet been passed but some of the GAAR provisions have been incorporated in Chapter Wealth Act number 113 in the Finance Bill 2012/2013 which will inevitably become law in the coming days.

Thus, the Finance Act 2012/2013 will authorize the Commissioner of India to levy taxes on income, including those from Capital Gains also known as capital gains from transactions concluded outside India. "We have not been sitting Crusaders, " says Nikhil Treebhoohun, Chief Executive Officer of Global Institutional Investors Forum (GIIF) which works to strengthen the anchoring of Mauritius in the context of the global economy. He returned from a trip to India whose goal was to travel meet as many of the interlocutors in the private and the public to share the feeling of the Mauritian party. A form of silent diplomacy.  "We even made ??representations under the GAAR," says Chief Executive Officer of GIF. 

Nikhil Treebhoohun was confronted with the phenomenon of perception that, in many respects, is detrimental to the true image of our financial services sector in India. Talks have begun with the Federation of Chambers of Commerce and Industry of India to organize exchanges around a round table.

The Association of Trust and Management Companies' is mounted to the plate. In a statement dated April 27, 2012, the organization responsible for this show among others that: The budget proposals are still in debate. There is a lack of clarity over the application of the measures. Things can change if one takes into account the recommendations of the Standing Committee on Finance as part of Direct Taxes Code.  

The IPF said it had obtained the interest of Mauritius are preserved. "The assurance was given at the highest level that the interests of Mauritius under the convention on the elimination of risks of double taxation will not be threatened," the statement said.

Moreover, Kamal Hawabhay, president of the association supports have no indication that there is an exodus of investors from Mauritius to Singapore.

Kee Chong Li Kwong Wing, spokesman for the Mauritian Militant Movement but also operator in the field of finance and economics believes that Maurice suffers a lack of vision, strategy and good sense.

"Diversification is absent from the vocabulary of government. You should not put all our eggs in one basket. He would have had to diversify. The government did not bother to sign agreements for the avoidance of double taxation with the countries forming economic blocs in Africa with the exception of the agreement signed with Uganda in 2000, pre-t it.

He says that the authorities could be more vigilant. "The attacks against the Mauritian financial sector in Indian newspapers were warning signs. You had to be extremely vigilant and not to wait. The authorities have begun to respond but late. But, better late than never, " he declared.