India negotiating changes in Mauritius tax treaty: Pranab

Washington, June 29 (PTI) Indian Finance Minister Pranab
Mukherjee Wednesday said the government is negotiating changes
in a tax treaty with Mauritius, the country which accounts for
the maximum foreign investment in India.
"So far as Mauritius is concerned, we are having
discussions with them for amendment of the avoidance of double
taxation agreement. Talks are going on," Mukherjee told PTI
when asked whether the government is looking at the
possibility of imposing levies on inflows from tax havens.
Around 42 per cent of FDI and about 40 per cent of FII
fund flows into India are routed through the island nation.
It is believed that a large majority of them are third
country investors which use the Double Taxation Avoidance
Convention (DTAC) with Mauritius for saving capital gains tax.
Mukherjee said the group of 20 developing and developed
countries across the world are holding discussions on
cooperating to share banking information.
"... These can be achieved through a legal framework and
that legal framework is provided by two sorts of agreements --
one is avoidance of the double taxation agreement and another
is the tax information exchange agreement," he said.
So far India has negotiated/renegotiated DTAAs with 33
countries and also entered into Tax Information Exchange
Agreements (TIEA) with 13.
Mukherjee said the legal framework required to trace
black money "alleged" to have been stashed in overseas
accounts was being worked out. "This legal framework is being
framed and we are working on it," he added.Indian Finance Secretary Sunil Mitra recently said that
discussions to resume the re-negotiation of the three-decade
old treaty, stalled since 2008, are likely to resume in July
or August.
While the government has been pressing for re-negotiating
the Mauritius treaty, seeking to plug the loopholes and
revenue leakages, some experts have raised concerns that the
move may impact foreign direct investment (FDI) into the
country.
According the the pact, capital gains from the sale of
shares by residents of Mauritius in India would be liable to
tax only in that country. As Mauritius does not have capital
gain tax, there is no burden on investors routing money in
India through a circuitous route.