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The Mauritian Offshore Sector is again under pressure.
1 September 2005
The Indian Foreign secretary, Mr Shyam Saram, visited Mauritius last week. Although this was more a courtesy visit to greet the new government and prepare the Indian trip of the Mauritian prime minister, Honourable Navin Ramgoolam, at the end of the year, he also seized the opportunity to discuss more economic matters - more specifically the double taxation agreement.
This agreement, signed by both countries, helped the offshore sector in Mauritius to take off but it has often been criticised by the Indian authorities. It was aimed at preventing the same revenue from being taxed in two countries. In fact, the dividends are taxable in India while the capital gains are payable in Mauritius. But the problem is that there is no tax imposed on capital gains in Mauritius. Tax authorities are afraid that the absence of tax makes the Indian State lose important income.
This is why the Indian government would like to renegotiate the treaty and to bring about some changes in the agreement. The treaty will be reviewed and given more importance thanks to a new Comprehensive Economic Co-operation Partnership between Mauritius and India.
What makes Mauritius even more anxious about the review of the agreement is the fact that India has recently signed a similar agreement with Singapore. This is seen as a serious threat to global business in Mauritius, which mostly depends on the Indian market.
But India wants to give the assurance that there is no direct link between the agreement with Singapore and the fact it wants to review the one with Mauritius. "There is space for everyone. The treaty with Mauritius has benefits that are not included in the one with Singapore. 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..." Shyam Saran pointed out.
The Indian Foreign secretary also highlighted that his country was ready to help Mauritius in traditional sectors such as textile and sugar but also in more recent fields such as finance, information and communication technologies and tourism. India will help Mauritius promote wind energy, production of electricity from bagasse and the production of ethanol.
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