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Indian Foreign Secretary Reassures Mauritius On Tax Agreement

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

08 September 2005

With a second round of talks on the Indo-Mauritian Comprehensive Economic Cooperation Partnership Agreement (CECPA) due to begin on Friday, Indian Foreign Secretary, Shyam Saram, was more or less reassuring on the subject of the countries' Double Tax Avoidance Agreement (DTAA) on a trip to Mauritius last week.

Although the visit was primarily to meet the new Mauritian government and prepare for the Indian trip of the Mauritian prime minister, Navin Ramgoolam, at the end of the year, the Minister mentioned economic issues, including the double taxation agreement. Indian tax authorities have been worrying for some time that the absence of capital gains tax on holding companies in Mauritius makes it too easy for Indian entrepreneurs to 'park' their Indian assets offshore. So far, however, legal challenges to the DTAA in India have failed, and the Indian Government has not seemed overly concerned.

When India recently signed a CEPCA with Singapore, which includes only a very narrowly defined capital gains tax exemption, Mauritius began to have concerns that their DTAA might be under threat.

“The treaty will be reviewed and given more importance thanks to (the) new Comprehensive Economic Cooperation Partnership between Mauritius and India,” explained the Mauritian minister of Foreign Affairs, Madan Dulloo.

However, the India Foreign Minister downplayed these fears. “There is space for everyone. The treaty with Mauritius has benefits that are not included in the one with Singapore," he said. "You have offshore management firms, which know the Indian market very well and which offer a high-level service to operators investing in India. You don’t have to worry…”

The Indian Foreign secretary also emphasized that his country was ready to help Mauritius in traditional sectors such as textile and sugar – but also in newer sectors such as finance, information and communication technologies and tourism.

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