In what should come as welcome news for the island economy, the Government of India said on Tuesday that efforts were being made to find a mutually acceptable solution to address India’s concerns while revising the tax treaty with Mauritius.

In a written reply to the Rajya Sabha, India’s Upper House of Parliament, Minister of State for Finance J. D. Seelam said that, as far back as 2006, a joint working group comprising members from both Mauritius and India was set up to assess the Double Taxation Avoidance Convention (DTAC) and this group met several times.

However, Seelam added that it has not been possible till date to reach an agreement over the revision of the treaty and the Indian government continues to struggle to reach an acceptable solution with Mauritius that would adequately address its concerns.

Certain modifications to the agreement for prevention of treaty abuse and reinforcing the mechanism for exchange of information on India-Mauritius tax matters are critical clauses for India to close out its double tax avoidance agreement with the island nation.

The Government has proposed to review the DTAC India-Mauritius to incorporate improvements to the pact for prevention of treaty abuse and to strengthen the mechanism for exchange of information on tax matters between the two countries.

The Indian government has openly expressed concerns that the Indian Ocean nation was being used for round-tripping of fund to and from India, triggering a revision in its DTAC with Mauritius.

For its part, Mauritius has denied such misused on the grounds that there is no solid evidence to prove that its global businesses are using the island economy for tax avoidance.

India perceives Mauritius as one of the biggest sources of foreign direct investment (FDI) and for many years, the island nation has been its preferred partner to drive foreign direct investment into the country.

It is to be noted that Mauritius has, until now, concluded 39 tax treaties across countries and is party to a series of treaties under negotiation. India figures on the list of tax information exchange agreements for which Mauritius is anticipating a final sign off, but the wait has dragged on for far too long already, causing investors to turn to other offshore jurisdictions such as Singapore, to route their investments into India.

Image (via World News Network): Navin Ramgoolam, Prime minister of Mauritius, with his Indian counterpart Manmohan Singh. India figures on the list of tax information exchange agreements for which Mauritius is anticipating a final sign off, but the wait has dragged on for far too long already.

Source: Press Trust of India

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