Breakthrough in India, Mauritius negotiations unlikely soon

Arvin Boolell, foreign minister, Mauritius, indicated that a breakthrough in the India, Mauritius negotiations is unlikely any time soon, reports Siddharth Zarabi of CNBC-TV18.

The island nation will not cede ground on levying the capital gains tax and Article 13 that mandates zero capital gains tax on investments from Mauritius is sacrosanct. However, Mauritius is open to include limitations of benefits clause in the tax treaty with India. So, companies only with substantial presence in Mauritius avail of treaty benefits. This may not hold water with the Indian government which introduced GAAR after a breakdown of negotiations with Mauritius. A joint working group will meet in August for further discussions. Below is the edited transcript of Arvin Boolell interview to CNBC-TV18. Also watch the accompanying video. Q: Can the stalemate on the tax treaty between the two countries could be broken?
A: There is no stalemate; a joint working group will meet from July 22-24. There are issues of concern which will be addressed. As far as Mauritius is concerned, we have said and reinforced that Article 13 is sacrosanct. Q: In the past, Mauritius declined India's proposed compensation of Rs 4,000 crore. So, how much hope should we have that there would be a change through the process of joint working group?
A: My understanding is clear that India will never do anything to harm the economic interest of Mauritius. Q: We already have instituted GAAR?
A: GAAR is a domestic issue that needs to be resolved and there is lot of controversy on GAAR. This is a treaty that is serving the interest of both countries. Of course, like willing partners we are willing to constantly bring some stringent regulation. Q: Why doesn't Mauritius offer India a move of at least imposing some capital gains and not remaining a zero tax jurisdiction forever?
A: No, as I mentioned earlier that we believe in sacrosanctity of this Article. We say that there should be limitation of benefits embedded into the treaty; we are yet to define specific modalities. So, discussion is still going on. Q: By when do you think this limitation of benefits negotiation will actually conclude?
A: There are mutual feelings that we need to conclude and do away with the element of uncertainty and usher in a climate of certainty, credibility and reliability for the benefit of both countries.