Trust in policy framework vital to lure investors: Jalan

Padma Venkatraman
Moneycontrol Bureau

Mauritius has been an allure to Indians, not only for pleasure trips, but also as safe haven for tax avoidance, or so the government seems to believe. India had signed the DTAA or double tax avoidance agreement with Mauritius in an attempt to boost investments. A DTAA is an agreement between two countries to mitigate problems of taxing a company twice, a condition that may arise when the tax laws of the land considers the company to be resident in more than one jurisdiction. According to the income tax department of India, companies have been misusing this agreement for the purpose of tax avoidance. In fact, majority of investments into India come through Mauritius.

Since the Vodafone case came to light, the government has been stressing on implementation of General Anti-Avoidance Rules (GAAR) for firm regulation to prevent tax avoidance. Though in the long-run it might do the country good, the Street reacted negatively on assumption that investment and investor confidence might get affected.

The finance ministry