Recent data released by the International Consortium of Investigative Journalists (ICIJ) indicates a significant connection between India and Mauritius in terms of financial activity. Of the entities disclosed in the Mauritius leaks, one-fourth were reported to have India as their single or one among multiple countries of operation. Although direct investments in India through Mauritius have been experiencing a decline, there’s a notable level of funds being channeled via this route by entities that operate or invest in India.
Understanding the Mauritius Leaks
In what came to be known as the Mauritius Leaks, over 200,000 leaked documents including emails, contracts, and bank statements exposed how Multinational Companies manipulated low tax rates in countries like Mauritius for tax avoidance. The leaks followed the tradition of Swiss leaks, Panama papers, and Paradise papers in revealing how corporations utilize island nations such as Mauritius to establish partnerships with other multinationals. These arrangements allow them to transfer profits as Foreign Direct Investment (FDI) to countries like India while avoiding the payment of capital gains tax.
The Tax Treaty Between India and Mauritius
The Double Taxation Avoidance Agreement (DTAA), established between India and Mauritius in 1982, laid the foundation for these financial maneuvers. The treaty allowed any entity to apply for tax residency and consequently pay zero capital gains tax. This factor largely contributed to the rise of Mauritius as a major conduit for investments into India. However, in 2016, India revised its DTAA with Mauritius, introducing new regulations related to capital gains tax.
About GAAR and CRS
GAAR (General Anti Avoidance Rule) and CRS (Common Reporting Standard) are two important systems in context. GAAR is an anti-tax avoidance regulation under the Income Tax Act, 1961 of India, drafted by the Department of Revenue under the Ministry of Finance. The CRS, on the other hand, is an international standard for the Automatic Exchange Of Information (AEOI) pertaining to bank accounts on a global scale. Its objective is to fight tax evasion.
Facts At Glance
| Fact | Detail |
|---|---|
| Mauritius Leaks Number | 200,000 Documents |
| Release Date of Mauritius Leaks | 2019 |
| Indian Investment Entities via Mauritius | 50 |
| Year DTAA was Amended | 2016 |
The International Consortium of Investigative Journalists (ICIJ)
The ICIJ is a US-based non-profit organization that operates with a global network of journalists and media bodies. Working collaboratively, they investigate critical world issues. Some of their notable works include the Pulitzer Prize-winning Panama Papers. As an entirely donation-funded entity, the ICIJ welcomes tips, leaks, and story suggestions from the public, whistleblowers, and seasoned investigative journalists.