The Finance Ministry favours re-negotiation of the tax treaty with Mauritius so that India could have access to banking details, besides tax-related information. With a view to prevent generation of black money and stop re-routing of funds through Mauritius, the Finance Ministry has recently asked the Ministry of External Affairs to tighten the Double Taxation Avoidance Agreement (DTAA) between the two countries.
“Ministry of Finance recently requested MEA to take up this matter with the Mauritius government to include specific provision of sharing of banking information and also an article on assistance in collection of taxes,” Central Board of Direct Taxes (CBDT) Chairman Sudhir Chandra told reporters here.
Although a small island nation, Mauritius accounts for about 42 per cent of USD 127 billion Foreign Direct Investment (FDI) into the country since 2000.
Concerns have been raised in the recent past over suspicion of round tripping or routing of Indians” illicit money back into the country through tax havens.
Indian agencies are said to have increased their oversight after they noticed a significant surge in venture capital funds coming from Mauritius in sectors like telecom and real estate, which have been under close scrutiny in recent times for money laundering.
The tax friendly regime in Mauritius has always been a key factor for entities that wish to invest in India to set up shop in the island nation.
However, this tax benefit has also come in handy for those wishing to indulge in round tripping activities or routing of illicit funds back into India through Mauritius.
To trail alleged black money, India has concluded discussions on 11 Tax Information Exchange Agreements (TIEAs) and 13 new Double Taxation Avoidance Agreements (DTAAs), along with revision of provisions of 10 existing DTAAs in the last fiscal.
Issues must not be mixed. Using a DTAA for investment purposes must not be mixed with illicit activities. In the absence of a DTAA, there would not even be the possibility of exchange of information in the case of illicit activities.