India plans to plug loopholes in tax treaty with Mauritius
Monday, 16 December 2002, 20:30 IST
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NEW DELHI: The usage of the Mauritius route to invest in India is not going to be easy any more. The Indian government proposes to closely examine all the foreign direct investment (FDI) proposals routed through Mauritius to find out if the prime objective of investing is to obtain tax benefits. New Delhi has a double taxation avoidance agreement with Mauritius that, some analysts say, makes it easier for foreign institutions to route funds via the Indian Ocean country into the Indian markets and manipulate share prices. Although the government has decided not to go in for any amendment in the treaty, it is not ready to lose revenue that would otherwise have accrued to the exchequer had the Double Taxation Avoidance (DTA) agreement not been misused. Government documentation reveals that it is concerned primarily over the loss of revenue and the need for funds is emphasised by the sluggish growth in domestic tax collections. In its first action under the new norms to check FDI through Mauritius, the government has denied Jumbo Worldwide Holdings Ltd. (JWHL) the benefits of the DTA. The government suspects that the investments being routed through this company based in Mauritius into India's Shaw Wallace & Company (SWC) was being done only to reduce the latter's tax burden. Both, Jumbo Worldwide and Shaw Wallace, are said to be part of the diversified Chhabria empire. Analysts, however, say that the government decision is based on suspicion and not necessarily on facts. They argue that the matter could be legally examined particularly since the government has not notified specific guidelines on examining the flow of funds through Mauritius.
Source: IANS
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