Proposal to Mauritius for Clampdown on Fund Transfers

New Delhi
Proposal to Mauritius for Clampdown on Fund Transfers
Mauritius, till now considered a tax haven for many who stack black money there, may no longer remain so if the island nation accepts an Indian proposal to crackdown on illegal fund transfer routes.

Concerned over high volume of black money routing to the country as investment, New Delhi has approached the Mauritius government to curb such fund transfer.

"The country has become a tax haven for many Indians to stack ill-gotten funds and then transfer them as investment. We hope that the Mauritius government will respond to our proposal as it has become essential to snap the route," a government official said.

The Finance Ministry is currently reviewing its 1983 Double Taxation Avoidance Agreement (DTAA) with Mauritius as, according to sources, the country is losing tax to the tune of crores of rupees because of an increasing number of deals that are struck here.

Interestingly, financial enforcement agencies probing high value cases like the IPL, 2G spectrum allocation, Commonwealth Games and many other such deals, have traced money in these scams to Mauritius. These funds were diverted in order to evade taxes under the DTAA.

At present, capital gains are fully exempted from taxation in Mauritius and the DTAA between the two countries mandates that such gains from the sale of shares will be taxed only in the country of residence of an investor.

Sources in the Ministry say tax officials are hopeful of reviewing the existing DTAA treaty by incorporating an important clause of "disclosure of all assets, investments and details of the investor", in both the cases of routing funds from the island country to India or investing in Mauritius for financial structuring deals.

British Virgin Islands, Isle of Mann, Cyprus, Cayman Island and Bermuda are some of the other tax havens where Indians are known to have parked their funds and round-tripped them to be subsequently invested in India.
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