More discussion needed on DTAA with Mauritius: Krishna

Sagar Kulkarni
Port Louis (Mauritius), Jul 3 (PTI) India Saturday
said more discussions were needed for changing the Double
Taxation Avoidance Treaty with Mauritius, which accounts for
as much as 43 per cent of foreign direct investment (FDI) into
the country.
"It did come up for discussion and then we have agreed
that more discussions need to take place on this particular
point," Indian External Affairs Minister S M Krishna told
reporters after a meeting with Mauritius Prime Minister
Navinchandra Ramgoolam.
Krishna is on a two-day visit here, his first as
External Affairs Minister, to deepen strategic, economic and
cultural relations with the island nation.
Mauritius does not tax capital gains. So, many
investors prefer to route investments in India through this
country.
The secrecy clause in DTAA protects the identity of
investors resulting in tax evasion.
"So, perhaps at the level of bureaucracy it (DTAA
renegotiations) will be taken up," Krishna said.
India had sought to re-negotiate the DTAA with
Mauritius, besides 75 other countries, as it is concerned over
a large tax revenue loss.
A large number of foreign institutional investors who
trade on the Indian stock markets operate from Mauritius which
is hence one of the biggest investor in India.
The DTAA with Mauritius is allegedly being misused by
some investors, who route their inflows through the low-tax
island nation, despite being located in a third country. The
practice is known as treaty shopping in the tax parlance.
During the 2000-2010 period, the maximum FDI inflows
into India came through the Mauritius route. Investors pumped
in a whopping USD 47.24 billion into the country from
Mauritius, constituting 43 per cent of total FDI. PTI