His mandate as High Commissioner of India has expired. Time for Shri Anup Kumar Mudgal to share his views on the new terms of the Double Taxation Avoidance Convention. He feels  surprised about the comments on the Termination of Treaty.

Can you clarify the situation concerning the purported notification of Termination of treaty of the Double Taxation Avoidance Convention (DTAC) that you mentioned in an interview on Friday?

I am quite surprised at the manner in which my comments on this issue have been interpreted. As I have mentioned earlier, and as Minister Roshi Bhadain has also explained, given the fast evolving global compliance standards in the financial services sector, India’s own firm commitment to move completely to source-based taxation and to bring GAAR (General Anti-Avoidance Rules) into force starting the next financial year, status quo was no longer an option – neither for Mauritius, nor for India.

Both sides were acutely aware of the inevitability of this process, and therefore worked very hard to incorporate sufficient safeguards and transition provisions, to ensure that the DTAC remains a valuable instrument, and an important element in the next generation India Mauritius financial sector relationship.

The offshore business community in Mauritius is worried about the terms of the amended tax treaty. They were expecting a better outcome of the negociations after PM Modi promised that India would do nothing that could hurt Mauritius.

The India-Mauritius DTAC is a valuable instrument that has served both countries well over the years, and it will continue to do so, as long as it meets the  requirements of the fast changing global scenario. Like all contemporary economic sectors, the financial services sector is constantly evolving. As the offshore business community itself knows, there is a universal move towards a more transparent, compliant, and substantive framework for modern financial products and services, including a move towards source-based taxation of capital gains. This is a definite process, and neither Mauritius nor India would want to get left behind.

It was the uncertainty as a result of the prolonged negotiations that was proving detrimental to this sector in both countries. We are pleased that our consultative dialogue mechanism has yielded such a forward-looking result – it is precisely in view of Prime Minister Modi’s assurance that all steps were taken during the negotiations to ensure that Mauritius is not disadvantaged in any way, and that sufficient safeguards and provisions are provided for the transition period. These amendments will not only make the DTAC more robust and sustainable in the long term, but also pave the way for a new era of India-Mauritius financial sector engagement.

The DTAC provisions on capital gains are only one small part of the many factors that have contributed to our special relationship in this sector. The other benefits of the DTAC will remain, and this, combined with the inherent advantages of the Mauritian Financial Centre and its well-established financial and governance eco-system will make Mauritius an even more dependable destination for investors.

The previous treaty contained a most favoured nation clause. Mauritius no longer benefits from this status. Can we infer that this is a result of scaled-down relationship between our countries?

I am quite surprised that you choose to draw such an inference! First, let me reiterate again that throughout the negotiations, great pains were taken to ensure that Mauritius, a special and strategic partner of India, is not placed at a disadvantage in respect to any other jurisdiction. You must also keep in mind that India is committed to moving to source-based taxation of capital gains without exception, and is already pursuing this with other partners. It is precisely because of our priviledged relationship that so much effort has been made for sufficient grandfathering safeguards and transition provisions.

As far as our relationship goes, you would no doubt agree that the India- Mauritius partnership is defined by much more than any single arrangement. This relationship extends to every imaginable aspect of governance – political, economic, social, cultural or educational. We have sustained political engagement and goodwill at the highest level, inter governmental and institutional cooperation, and vibrant people-to-people contacts. It is entirely in keeping with this extraordinary relationship that we are moving forward together in this transformational process.

Is there any link between the change in the tax treaty and the grant which was announced at the same time?

As I mentioned, India stands with Mauritius as it moves on the path of transforming its economy. India has been a steadfast partner in the socio-economic development of Mauritius from the very beginning – be it capacity and institution building or iconic landmarks such as the Cyber City and SVICC. In March last year, Prime Minister Shri Narendra Modi announced a dedicated Line of Credit of USD 500 million for priority infrastructure projects of the Mauritian Government. We have also offered our support and assistance in key sectors identified in your Government’s Vision 2030 plan. This includes some areas with immense potential, such as Ocean Economy, ICT, petroleum storage and bunkering, specialized health care, research and innovation. The grants we have announced are in keeping with this long-standing and multi-faceted partnership. These are meant to support any priority projects that are chosen and identified by your Government. India would of course be proud to be associated with future Mauritian landmarks such as the new Parliament building and PMO, the new International Convention Centre and the Mauritius Financial Centre Twin Towers, among others.

Now that your two-year mandate as High Commissioner has expired, can you share your insights as to how Mauritius can achieve the economic breakthrough that people are expecting?

Mauritius is already a shining example to the world – you can today boast of impressive accomplishments that India and your other partners would be genuinely proud of: you are consistently ranked highly in various global indices of socio-economic development, be it governance, standards of living or economic competitiveness. Mauritian society is a peaceful, democratic, vibrant and pluralistic mosaic of ethnicities, religions, and languages. This is a forward-looking and progressive investor-friendly country with well-developed and modern infrastructure and communication facilities. Mauritius also provides an ideal gateway for Indian enterprises seeking to expand into Africa and the wider Indian Ocean region.

In a competitive and globalized world, the key to sustained socio-economic development is to continually adapt and evolve according to the changing times. This is a transformational moment, and India would remain an unwavering partner with Mauritius on this journey.