Just 24 hours after Indian equities nosedived by 364 points on concerns over an Indo-Mauritius tax pact review, Indian Finance Minister Pranab Mukherjee sought to downplay the issue.
“As far as the DTAA (double tax avoidance agreement) with Mauritius is concerned, there is nothing new in it. It is an old one.
“For some time the talks were suspended. Now they have resumed,” Mr Mukherjee told Indian reporters on the sidelines of a conference of state finance ministers.
The news of renegotiations of DTAA with Mauritius triggered across-the-board selling in the capital market on Monday resulting in the government resorting to damage control with Finance Secretary Sunil Mitra clarifying the issue of capital gains tax, saying it was not in the agenda. India has suggested dates in July-August for review of the tax treaty, which is used for roundtripping black money as investments in India.
Economic Affairs Secretary, R Gopalan said: “One double tax agreement will not affect FDI inflow. India has DTAA with 79 countries, which are being reviewed to incorporate a clause to allow exchange of banking information. This will provide a channel to trace black money stashed abroad.
“Of them, India has already renegotiated about, including Switzerland and several other tax havens.” There are various estimates of Indian black money stashed abroad, which range from $462 billion to $1.5 trillion.
Black money has lately become a public issue in the country and the government is under pressure from opposition parties to renegotiate tax treaties. The government is reported to be losing $600 million revenue annually due to DTAA