India, Mauritius Working Group to Discuss Tax Avoidance Pact

Mr Arvin Boolell, Minister of Foreign Affairs, International Trade and Co-operation, Mauritius, told Business Line that “the Joint Working Group will discuss various issues and, in particular, tax residency certificate and round tripping.”

This will be the eighth round of the group’s meeting to review DTAA.

Over 39 per cent of total foreign direct investment inflows into India came via Mauritius during April 2000 to February 2012.

Low-tax jurisdiction

Denying the allegation of Mauritius being a tax haven, Mr Boolell said: “We are clean, neat and have low-tax jurisdiction. We are on the on the white list of OECD (Organisation of Economic Co-operation and Development), which clearly shows that our regulations are the best in line.” On ‘post box companies’ in Mauritius, Mr Boolell clarified that tax residency certificates are issued only after strict conditions are met. “If there is a requirement to make this more stringent, Mauritius is willing to do so,” he added.

He said Indian auditors could go to Mauritius and audit the records of companies that originate in India. “They can submit their report to the local authorities and if something wrong is detected, whatsoever action is required will be taken,” he added.

Earlier, the Indian Government had blamed Mauritius for not co-operating with India to prevent misuse of the Double Taxation Avoidance Convention (DTAC).

Mr S.S. Palanimanikam, Minister of State for Finance, informed the Lok Sabha on May 4 in a written reply that, “A Joint Working Group comprising members from the Government of India and the Government of Mauritius was constituted in 2006 to inter-alia put in place adequate safeguards to prevent misuse of the India-Mauritius DTAC. Seven rounds of taken place so far. There was unwillingness on the part of Mauritius to co-operate in addressing the problem.”

Assessment not possible

However, the Ministry expressed its inability to give an assessment of revenue loss on account of tax exemption granted on investment routed through Mauritius.

Mr Palanimanikam said it was not possible as it depended on a number of factors such as sale and purchase price, factor of cost inflation index, cost of transfer, the set-off loss, etc.