Port Louis: India and Mauritius will work together to avoid the "abuse" of double taxation avoidance convention, Prime Minister Narendra Modi declared on Thursday, as the two countries agreed to push negotiations for a long pending revision of the treaty.
He also assured Mauritius that India will do nothing to harm the vibrant financial sector of "one of our closest strategic partners".
"We will work together for our shared objective to avoid the abuse of our double taxation avoidance convention," Modi, who is on a two-day visit, said while addressing the National Assembly of the Indian Ocean island nation.
Often corporates have been accused of laundering money through the "Mauritius route" for channelling FDI in India and the two governments have been in negotiations to curb this practice.
Negotiations to amend the bilateral tax treaty have been hanging fire for a long time amid India's apprehensions that it is being misused to route black money and evade taxes.
Prime Minister Modi and his host Sir Anerood Jugnauth agreed to push forward their negotiations for a long pending revision of Double Taxation Avoidance Treaty (DTAT) during their talks here last night.
"Yesterday, I told Prime Minister Jugnauth that we understand the importance of the offshore banking sector for your economy. We are conscious of its dependence on India," he told lawmakers.
"We will do nothing to harm this vibrant sector of one of our closest strategic partners," he assured the lawmakers in his address on Thursday.
Jugnauth yesterday said that he had raised with Modi issues related to the Mauritius-India Double Taxation Avoidance Agreement (DTAA).
"We appreciate that already India postponed the consideration of the GAAR until 2017. However, we have stressed on the initiatives taken by Mauritius to build substance within our offshore jurisdiction. I have requested PM Modi to give his full support on the DTAA as it is of prime importance for our global business sector," he said.
Modi in his response said the two sides agreed to continue negotiations for a revised treaty based on shared objectives to prevent the "abuse" of the convention.