If the Mauritian tax treaty is such a pain for India, then they should just get rid of it. They clearly haven't, so it must be of some value -- thus you can't shame companies for using it to legally sidestep taxes.
Do we have evidence of this? A lot of investment into India would not occur without a stable legal and tax environment on which to stage it. Traditionally, those have been Singapore and Mauritius.
Not that it's an unstable nation, all things considered, but I feel like it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability".
From the article, quoted from a leaked email: This is primarily being done to ensure the Druva restructure does not result in it becoming taxable.
Why does it go without saying? Indian courts can take 10+ years to resolve simple disputes; Mauritian courts are much faster.
A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with.
Mainly because their motivations for doing so (namely: tax avoidance) were spelled out by the companies and their accountants in a series of email leaks. That's the thread we're in right now.
Australia and Canada have DTAs with India too. Pretty stable countries by most people's reckoning, potentially moreso than Mauritius and both with solid legal systems. Yet we aren't seeing PwC recommend to Silicon Valley investment firms that they spin up Australian shell companies to facilitate Indian investment.
We could probably speculate as to why not, or we could look at what the companies and their accountants said in the aforementioned series of leaked emails.
It's tax avoidance. It's not illegal, but it's not simplification or stability.
Yea, it's got nothing to do with extracting the maximum amount of revenue out of the host country whilst managing to avoid giving anything back in taxation :]
I’m comparing accounting costs. Both paid to the same offshore accountant. Indian tax codes are complicated and unpredictable. Mauritian ones are not. As an outsider, simplicity wins. (I’d gladly pay a higher foreign tax rate if it meant simpler paperwork.)
The Mauritian treaty does not contain any abnormal clauses that are uncommon in intra EU treaties and for example, most US-EU treaties.
Double taxation treaties are a way to incentivise people to invest in a specific country. Generally both countries exempt (or promise to partially exempt) booked income from the other country so that it does not get taxed twice. It does not exempt them from all taxation whatsoever.
But an example: if as a UK resident you invest in the US and book a capital gain on a shareholding, you won't pay US capital gains tax. That will be exempt. But you will pay capital gains tax in the UK.
If they are treaties with tax havens, places used purposefully for those reasons, then yes, they are.
"Tax haven" is an ambiguous term. Double taxation treaties exist so investments aren't taxed twice, once at the origin and again at the destination. The Indian-Mauritian treaty mostly covers capital gains, and in that way is similar to most such treaties.
The principal benefit of jurisdictions like Mauritius, the Cayman Islands, Delaware or Singapore is less to reduce taxes than to simplify them. Indian taxes are wonky and volatile. Indian courts are slow and expensive. Going through Mauritius lets an international investor finance projects in India while abstracting away a lot of cruft.
Well, I seriously doubt that. Especially when extremely elaborate schemes are used to route taxes to those destinations and "simplify" them...