Mauritius says GAAR should not override tax treaty

Our Bureau Updated - July 06, 2012 at 10:32 PM.

Mauritius has claimed that it has exchanged information related to over 170 tax cases with India over three years. It also said that the two countries have made big progress on the Double Taxation Avoidance Agreement (DTAA) since 2006.

Addressing a press conference, the Foreign Minister of Mauritius, Dr Arvin Boolell, said that some of the information exchanged was even outside the DTAA that the two countries have with each other.

In an obvious reference to the recently enacted General Anti Avoidance Rules (GARR), he said, “domestic legislations should not over-ride the taxation treaty between India and Mauritius.”

The India-Mauritius tax treaty provides that capital gains arising in India from investments in the country from the island nation can only be taxed in Mauritius. As Mauritius does not tax capital gains, investments that are routed through the country escape this levy.

A large quantum of foreign investments in India are routed through Mauritius to escape the tax net, which has prompted the government to bring out the General Anti-Avoidance Rules (GAAR) to prevent abuse of the tax treaty.

“Mauritius has done everything to curb round tripping,” Dr Boolell said. When asked about India’s demand for reworking DTAA, he said, “we will constantly make room for improvement, of course, in respect and in compliance with the best international practices.”

Shishir.s@thehindu.co.in

Published on July 6, 2012 17:02