Mauritius Leaks: Reports say Double Taxation Avoidance Agreement With India Was Abused For Over 30 years

New Delhi: An investigation led by the International Consortium of Investigative Journalists (ICIJ) and the Indian Express reveal in detail how corporations in Africa, Asia and West Asia have chosen Mauritius to avoid taxes.

The investigation was based on a data leak from a law firm, Conyers Dill & Pearman, in Mauritius that reveals how a set of corporates used the island nation “to facilitate their partnerships with multinationals and, without paying any capital gains tax, remit profits as Foreign Direct Investment (FDI) to India,” Express reported.

This latest ‘Mauritius Leaks’ adds to the volume of information on financial irregularities earlier put forward by Swiss Leaks, Panama Papers and Paradise Papers.

According to the report, the Double Taxation Avoidance Agreement (DTAA) between India and Mauritius (under which any entity could apply for tax residency and pay zero capital gains tax) signed in 1982, became “the principal reason why Mauritius emerged as a top channel for investments being routed into India.” However, as allegations on the treaty abuse grew, Indian tax authorities amended the DTAA in May 2016, and imposed capital gains tax.

“That changed the game for companies like Conyers. Also, companies have shifted their plans to invest via Mauritius and it lost its supremacy for being the country which brought in the highest FDI inflows. The figures reflected the shift and in the year 2018-2019, there was a 44% fall in FDI inflows into India from Mauritius in comparison to the previous year,” says the report.

The investigation found how Religare Enterprises Ltd (REL), a listed company in India, routed funds into a Jersey-based firm owned by Malvinder Singh and Shivinder Singh.

Analysis of documents obtained from Appleby (law firm data that helped Paradise Papers investigation) and Conyers, Dill and Pearman show that Religare Capital Markets Ltd (RCML), a wholly-owned subsidiary of REL, set up an investment holding subsidiary called Religare Capital Markets International (Mauritius) Ltd, in Mauritius in 2008, which was used as a vehicle to acquire a 30 per cent stake in another Jersey-headquartered entity, NCM Limited.

As per another Express report, the NCM’s shareholders are Malvinder Singh and Shivinder Singh, and their spouses Japna Malvinder Singh and Aditi Shivinder Singh. “Between June 23, 2009, and August 26, 2015, the RCML subscribed to ordinary shares and zero percent optionally convertible debentures adding up to $367.64 million in share capital,” says the report.

Among other dealings revealed in the documents of Conyer are dealings between a commodity trading giant and Jindal Steel and Power Ltd over ownership of four bulk carrier vessels through a Mauritian company Pancore; details of the India Real Estate Fund of $200 million being announced in 2010-2011 in which two companies -- Pune-based real estate company, Kolte Patil Developers Limited (KPDL) and a US-based real estate investment company Portman Holdings LLC, invested $20 million; US-based Mayo Clinic and its subsidiary, Mayo Foundation had in 2011 used the Mauritius route to enter into a partnership with Apollo Hospitals and GMR to set up a high-end hospital near Hyderabad airport. Mayo Clinic set up a company called Mayo Mauritius but the project eventually did not take off.