The Government has blamed Mauritius for not co-operating in India's effort to prevent the misuse of the Double Taxation Avoidance Convention (DTAC).
Over 39 per cent of the total foreign direct investment inflows into the country have come through Mauritius from the April 2000 to February 2012 period.
Mr S.S. Palanimanikam, the Minister of State for Finance, informed the Lok Sabha in a written reply, “A joint working group comprising members from the Government of India and the Government of Mauritius was constituted in 2006 to inter-alia, put in place adequate safeguards to prevent misuse of the India-Mauritius DTAC. Seven rounds of talks have taken place so far. There was unwillingness on the part of Mauritius to co-operate in addressing the problem. ”
Consistent efforts are being made by the Indian Government to find mutually acceptable solutions for addressing India's concerns. The next round of joint working group meeting is yet to be scheduled, he added.
India has proposed to review the DTAC, with a view to incorporating appropriate amendments for prevention of treaty abuse. Once completed and ratified, this will strengthen the mechanism for exchange of information on tax matters between the two countries.
Although Mauritius is seen as a tax haven, the Finance Ministry said it is unable to give a figure for the revenue loss on account of tax exemption granted on investments routed through Mauritius.
Mr Palanimanikam said that it was not possible as it depended on factors like sale and purchase price, cost inflation, cost of transfer, the set-off loss suffered in one transfer against gains in the other and the carried forward losses of earlier years.
The exercise can be undertaken only if the income tax returns containing all relevant details are filed by every alienator of the asset.
“Since the tax on capital gains for Mauritius based entities is exempt, a large number of them do not file the returns unless they have other streams of income as well. Hence no reliable assessment can be made,” the Minister disclosed.