Following a meeting between the Indian External Affairs Minister, Mr Pranab Mukherjee and the Mauritian Prime Minister, Dr Navinchandra Ramgoolam, during the 62nd Session of the United Nations General Assembly, in New York, Mr Mukherjee made the following statement to the Mauritius Broadcasting Corporation:

“In matters of the avoidance of double taxation agreement, which we have entered into with Mauritius, this issue was discussed in greater details during the visit of His Excellency the (Mauritian) Prime Minister (Dr Ramgoolam) in Delhi. At that point of time, the (Indian) Prime Minister, Dr Manmohan Singh, assured him that nothing will be done to adversely affect the interests of Mauritius. And I also reiterated that”.

The taxation authority has been trying over a number of years to get the Courts and the Indian Government to tighten up the residency rules in the DTAA in order to prevent 'round-tripping' by Indian investors who make stock exchange and other investments in India from Mauritius-based entities, thereby by-passing the Indian capital gains tax.

Newer DTAAs, for instance that between India and Singapore, have used different wording which larely eliminates this problem, but the Mauritian government, although it has unilaterally imposed some restrictions on investors, has been unwilling to re-negotiate the DTAA. The matter came to a head when India and Mauritius signed a 'Closer Economic Cooperation Agreement' last year, whose implementation has been partially delayed because of the intransigence of some Indian interests 'on the side' of the tax department.

This latest statement by the Indian Government will go a long way to reassure Mauritius that the status quo is unlikely to be upset.