News: Left slams Govt on Mauritius double tax treaty
(FE 06/08/2006) New Delhi - After opposing petroleum price hikes, public sector disinvestments and the Indo-US nuclear deal, the Left has now turned its focus on the Double Taxation Avoidance Agreement (DTAA) India has with Mauritius. The treaty allows companies registered in Mauritius, governed by a zero tax regime, not to pay taxes in India.
In a letter to finance minister P Chidambaram, Tapan Kumar Sen, the Communist Party of India (Marxist) MP from West Bengal, has charged the finance ministry of not checking the misuse of the agreement. He said, “Your ministry proposes to limit the action only to exchange of information on tax matters between India and Mauritius and incorporation of provisions for prevention of treaty shopping.”
Quoting the National Common Minimum Programme (NCMP) of the government which says “vulnerability of the financial system to the flow of speculative capital will be reduced and misuse of double taxation agreement will be stopped,” Sen wrote that such “misuse” had already taken place.
Drawing attention towards the recommendations in the CAG report No.13 of 2005, he wrote: “The report had gone ahead to say that ‘income of FIIs/sub accounts engaged in the business of investment in stock markets was being erroneously categorised as capital gains and being tax exempted by invoking DTAAs’.”
“The Audit had as such recommended, ‘DTAAs may be examined critically through a phased and well-monitored programme so that interests of revenue are safeguarded and one-sided concessions are avoided’. The Audit has also recommended ‘the Board (Central Board of Direct Taxes) may assess the costs and benefits from each DTAA transparently and objectively, especially as DTAAs are not placed before Parliament’.”
A review of DTAA with Mauritius in on the agenda before the union government, but Chidambaram has reiterated that such an exercise will not be a unilateral one.
Bulk of FII and FDI inflows into India is routed through Mauritius due to the treaty.
Sen brought up the allegations of money laundering in investments in some companies. “Keeping in view the charges on source of funding of companies like Jet Airways and Sterlite, which have been raised in the Parliament, I urge upon the finance minister to revisit the issue.”
In a letter to finance minister P Chidambaram, Tapan Kumar Sen, the Communist Party of India (Marxist) MP from West Bengal, has charged the finance ministry of not checking the misuse of the agreement. He said, “Your ministry proposes to limit the action only to exchange of information on tax matters between India and Mauritius and incorporation of provisions for prevention of treaty shopping.”
Quoting the National Common Minimum Programme (NCMP) of the government which says “vulnerability of the financial system to the flow of speculative capital will be reduced and misuse of double taxation agreement will be stopped,” Sen wrote that such “misuse” had already taken place.
Drawing attention towards the recommendations in the CAG report No.13 of 2005, he wrote: “The report had gone ahead to say that ‘income of FIIs/sub accounts engaged in the business of investment in stock markets was being erroneously categorised as capital gains and being tax exempted by invoking DTAAs’.”
“The Audit had as such recommended, ‘DTAAs may be examined critically through a phased and well-monitored programme so that interests of revenue are safeguarded and one-sided concessions are avoided’. The Audit has also recommended ‘the Board (Central Board of Direct Taxes) may assess the costs and benefits from each DTAA transparently and objectively, especially as DTAAs are not placed before Parliament’.”
A review of DTAA with Mauritius in on the agenda before the union government, but Chidambaram has reiterated that such an exercise will not be a unilateral one.
Bulk of FII and FDI inflows into India is routed through Mauritius due to the treaty.
Sen brought up the allegations of money laundering in investments in some companies. “Keeping in view the charges on source of funding of companies like Jet Airways and Sterlite, which have been raised in the Parliament, I urge upon the finance minister to revisit the issue.”
posted by InCar Group Press Room at 12:13
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