Culprits in Mauritian maze could be caught

By Saurabh Shukla in New Delhi: Mail Today : 8  Jan 2013

Island nation may provide names of Indian tax defaulters AFTER several European countries providing names of Indian tax defaulters to the government, Mauritius could follow suit putting those shell companies using the island route to invest in the country under scanner. If implemented, it will be a major boost to efforts aimed at curbing the menace of black money and money laundering. According to sources, the government raised the issue with visiting Mauritian President Rajkeswur Purryag, who met Prime Minister Manmohan Singh, other important political leaders and President Pranab Mukherjee last week. “ We flagged the issue that some of these shell companies are misusing the provision, and the President [ Purryag] has indicated his willingness to stop round- tripping and promised to share tax- related information to curb black money,” a senior South Block official told MAIL TODAY . According to data, currently about 37 per cent of foreign direct investment in India comes through the Mauritian route. India and Mauritius have an annual bilateral trade of $ 4 billion with Indian exporting finished petroleum products to the island. During the discussion, Mauritian officials said that about 15,000 Mauritian nationals are employed by companies investing in India through the island route and action can be taken by New Delhi against those violating the law. Switzerland and Germany have already shared data of Indian tax offenders with the government. India is keen to review the tax treaty with Mauritius to prevent its misuse and strengthen the tax information exchange mechanism between the two countries. “ The government has proposed to review the India- Mauritius Double Taxation Avoidance Convention ( DTAC) bilaterally to incorporate appropriate changes in DTAC for prevention of treaty abuse and to strengthen the mechanism for exchange of information on tax matters between India and Mauritius,” finance minister P. Chidambaram had earlier said in response to a question in Parliament. A joint working group ( JWG) comprising Indian and Mauritian officials was constituted in 2006 to put in place adequate safeguards to prevent misuse of DTAC. However, the problems could not be resolved. Eight rounds of discussions have taken place and New Delhi is trying to work out an acceptable solution for addressing its concerns. The tax treaty, provides for taxation of capital gains arising from alienation of shares only in the country of residence of the investor. 15,000 Mauritian nationals are employed by firms investing in India