India plans to review tax treaty with Mauritius

India is considering a review of the Double Taxation Avoidance Treaty with Mauritius in order to end its misuse and loss of revenue to this country, minister of state for finance S S Palanimanickam said today.

India is losing more than $600 million every year in revenue because of the tax treaty, besides incurring the risk of militant groups using it to route money into this country.

Although the government has been under pressure from opposition to renegotiate the treaty, the government opted to continue with it as many Indian investors depended on Mauritius funds.

He said 39.5 per cent of the total foreign direct investment flows into the country between April 2000 and February 2012 have been channeled through Mauritius.

Palanimanickam said Mauritius was "unwilling" to bring in safeguards to prevent the misuse of taxation treaty between the two nations even after holding seven rounds of bilateral talks.

A joint working group comprising members of the two governments was constituted in 2006 to put in place adequate safeguards to prevent misuse of the India-Mauritius Double Taxation Avoidance Convention.

"Seven rounds of discussion have taken place so far. There was unwillingness on the part of Mauritius to cooperate in addressing this problem," the minister said in a written reply in the Lok Sabha.

However, no fresh dates have been finalised for the next round of talks on the issue, he said.