Double Taxation Treaty: India and Mauritius activate consultations

This work will allow representatives of both countries to strike a balance between the interest of Mauritius to defend the reputation of its financial services center and the right of India to take all measures to combat a scourge that give cold sweat in the States. This is the crime of tax evasion on a large scale is practiced in certain bilateral conventions regulated.

For quite some time, they look like china dogs. The cause of suspicion to the effect that the provisions of the Convention, providing for a thorough revision of the treaty to avoid double taxation, would be used from Mauritius by tax evaders just to bypass the Indian tax authorities.

As two friends who have common sense, Mauritius and India have decided to meet around a table in Port Louis on August 23 and 24. It will be in the work of the Joint Working Group. This committee was established precisely to what are considered all the points associated with this agreement who are likely to fuel a dispute between the two countries.

In anticipation of this meeting, the Mauritian government and the parties involved in this convention already sharpening their weapons. The Global Institutional Investors Forum (GIIF) has already informed the government points he wishes to evoke. The GIIF has set a mission to promote Mauritius as a center of global financial services reputation.

The dispute caused by use of the disputed provisions of this Convention, is not so simple to solve as one would have thought. Very fine, new, India did not find anything wrong when Maurice chose not to tax income from the transaction gains. Abuse of this procedure, all things legal in principle and design, they grind their teeth in India. The country has informed the Lok Sabha level by none other than the current president of the Great Peninsula, Pranab Mukherjee, Minister of Finance.

The reason is simple. It is losing money, big money to India from Indian point of view means. And this is not true. Because the current provisions are an open door to some who want to indulge in roundtripping. This is the term given to an approach that, initially, is to channel his money into the financial center of a country with which his country has signed an agreement.

It's not quite the money but it looks so. The dividing line is that this money will have the label when investment returns in the country of origin. But, it's bogus investment. And the host country's tax authorities will be powerless to strip him of his status as an investment, therefore, of his right not to be subject to tax.

For Mauritius, it is not a waste of money but a level playing or rather of the Convention. His posture is simple: maintain a situation where both countries are winners in their own way. In other words, it's 50/50.

India does not see it that way. She wants to change the rules of the game with the introduction of a legal instrument. This is the famous GAAR (General Anti-Avoidance Rule ) much-maligned by countries having signed a double taxation treaty with India. The latter, when it comes into force in 2013, will enable the Indian tax authorities to crack down when an investor suspected of crime of tax evasion.

“Yes to dialogue, however Mauritius should not succumb under pressure exercised by the Indian Authorities as such has been the case with Indonesia. Backing out is not an option, nor is abdication of our right to residence state taxation of capital gains arising out of Indian inbound investments. What constitutes the competitive edge of our Offshore Financial Services Centre over and above our main competitors strictly needs to be preserved” insists Mr. Didier Picon, Manging Director of Murray & Collins OMC.

Despite the uncertainties that the use of GAAR are still hanging over the fate of the agreement between India and Mauritius, the Mauritian government addresses the meeting on August 24 and 23 with optimism, confident in the words of a friendly country that has shown that India does not hurt but Mauritius is facing a tax evasion problem on its territory.