There is political will to resolve tax treaty issues: Mauritius

"It is being addressed by the two governments," Mauritius Minister of Industry, Commerce and Consumer Protection, Cader Sayed Hossen said during his India visit here.

Updated: Feb 17, 2013, 13:07 PM IST

New Delhi: There is definite "political will" in India and Mauritius to conclude a revised tax treaty so as to prevent misuse of bilateral provisions governing investments while routing of funds into and from India through the island nation, a Mauritian minister has said.

The two countries are discussing ways to prevent possible misuse of the provisions in the three-decade old treaty, especially since a major chunk of FDI and FII investments into India come from Mauritius, often seen as a place that is used for routing funds to avoid taxes.

"There is some issue on the DTAA (Double Taxation Avoidance Agreement) between India and Mauritius.

"It is being addressed by the two governments," Mauritius Minister of Industry, Commerce and Consumer Protection, Cader Sayed Hossen said during his India visit here.

"There is definitely a political will on both sides (to address DTAA issues)," Hossen said, adding that the issues would be resolved to the satisfaction of both the countries.

"It will (discussions) take the time that it will take. Everything would depend on the discussions of the Joint Working Group," he added.

A Joint Working Group (JWG) comprising members from the two sides was constituted in 2006 to put in place adequate safeguards to prevent misuse of the bilateral tax treaty.

Among others, India is believed to be seeking changes in the treaty so that information regarding source-based taxation of capital gains could be shared between the tax authorities.

Besides, the country is looking to incorporate benefit limitation clauses in the pact to prevent abuse of the treaty.

Recalling Mauritian Prime Minister Navinchandra Ramgoolam's visit to India in February last year, Hossen said that Mauritius had taken on board the representations of the Indian government at that time.

"The honourable Prime Minister Manmohan Singh did also say that at the end of the day nothing would be done to hurt the economic interests of Mauritius.

"So, there is definitely political will on both sides," Hossen said, citing last year's meeting between the Prime Minsters of the two countries.

Hossen said that the moment there is political agreement, "I don't see any reason why we should not come to a conclusion that is satisfactory to both parties".

Notified in 1983, the treaty provides for taxation of capital gains arising from alienation of shares only in the country of residence of the investor.

During the 2012 April-November period alone, FDI inflows from Mauritius stood at USD 7.21 billion. The inflows were worth USD 71.38 billion from April 2000 to November 2012, according to official data.

Mauritius, located in the African continent, is preferred by many global investors to channelise Indian investments mainly due to that nation's favourable regulations.

Hossen said that Mauritius offers a good investment proposition and the country is politically stable, besides having good logistics and labour laws.

India and Mauritius have also started the process of setting up of Joint Business Council (JBC) and a Joint Working Group (JWG) on trade and investment to boost bilateral economic ties.

This was discussed during Hossen's meeting with Commerce and Industry Minister Anand Sharma here on Friday.