Mauritius offers India 2 islands in effort to preserve tax treaty

Mauritius, keen on persevering with the 1983 double-taxation avoidance treaty with India, has revived its offer to give two islands to India. Mauritius foreign affairs and trade minister Arvin Boolell said that it was up to India to use the islands to its advantage. India could use North and South Agalega Islands (which are located 1,100 km north of Mauritius and have an official total area of 70 sq km) for setting up hotels and tourist resorts, for trade, marine studies, or for building a strategic presence in the Indian Ocean, official sources told TOI. North Agalega Island already has an airstrip.

In November 2006, TOI had first reported about preliminary discussions between the two countries for handover of Agalega Islands–which is closer to India than Mauritius–for development as a tourism and trade hub.

“There is no problem on the issue,” minister Boolell said when asked if the islands could be handed over to India as part of an economic package. Pressed further, Boolell said, “We want investment to flow into Mauritius. India can use Mauritius as a springboard for investment (to Africa) and locally. Now we want India to respond positively and take advantage – and it is true for other friendly countries – of the tremendous potential of the Blue Economy, which is the ocean economy.”

Interestingly, the offer of the islands has been renewed at a time when investment flows into India via Mauritius were threatening to dry up following the proposal to introduce GAAR (General Anti-Avoidance Rules) that aimed at plugging loopholes in the double-taxation avoidance treaty by making disclosure of the source of funds mandatory. Mauritius has maintained that GAAR was creating a lot of uncertainty among investors.

(ET 6JUL12)

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