Campaign Against Black Money: Modi Govt Plugs Indo-Mauritius Tax Treaty Loopholes

It redounds to the credit of the Modi government, particularly its Finance Minister Arun Jaitley that it has ended the three-decade-old farce called Indo-Mauritius Double Taxation Avoidance Agreement (DTAA). 

In 1983, India bartered away the country’s interests presumably for saving and promoting its crooks in the name of attracting foreign investments via the island nation.

Normally, capital gains tax earned by selling shares in Bombay Stock Exchange, for example, is taxable in India as it is an Indian income. But the treaty assigned the right to tax this income to Mauritius. And Mauritius in a manner of double take quietly abolished capital gains tax in its country post-haste thus playing dog in the manger to the hilt. Those in the know say that the Indian government was not backbitten but was played footsie with by the Mauritius government wink-wink nudge-nudge. Be that as it may.

The Modi government on Tuesday (10 May 2016) righted this patently inequitable regime by grandfathering its benefits. Shares of Indian companies purchased after 1 April 2017 will suffer short term capital gains tax in the hands of residents of Mauritius at half the rate normally applicable to Indian residents till 31 March 2019 and at par with the rates applicable to Indian residents come 1 April 2019.

This would be a small feather in the cap of the Modi government on the black money front as it would end round-tripping of Indian black money into India via Mauritius. It is common knowledge that bulk of the money flowing into India via Mauritius belongs to Indian politicians and businessmen.

But the world of black money is not worried because if the Mauritius door is shut, others are open in Tunisia, Panama, Seychelles, etc. G-20 and other initiatives should similarly carry its war against rogue nations completely so the peace-loving nations can feel secure against the scourge of black and illicit money. 

And in the fight against black money and money laundering, there is an elephant in the room - chartered accountants. Lawyers in juxtaposition emerge like saints because while lawyers get acquittal of crooks through legal sophistry and exploitation of loopholes, it is the chartered accountants who are complicit in financial crimes of their clients. In other words, a lawyer emerges on the scene after a crime is committed and his client caught whereas a CA is a guiding spirit behind a financial crime itself. It is he who studies the loopholes in law as well as the greener pastures albeit thousands of miles abroad and whispers wisdom into the ears of his client. In fact, the Panama papers, as well as, the Tunisian connection in the Agusta scam bear ample testimony to the insidious role played by the CAs. Time has come for national governments to wake up and stop indulging the professionals.