Mauritius styles itself as a Cayman Islands to India and offers India two islands in effort to preserve tax treaty
In order to style itself as another Cayman Islands how far will a country go to secure a favourable deal for itself? Pretty far, it seems. Mauritius has offered a couple of sun-drenched islands to India as part of a trade and investment deal. While the offer has been talked about for a while, Mauritius has revived it – at a time when it’s very keen on persevering with the 1983 double-taxation avoidance treaty with India.
Mauritius foreign affairs and trade minister Arvin Boolell said that it was up to India to use the islands to its advantage. He said the “blue economy” had great potential. India could use North and South Agalega Islands (which are located 1,100 km north of Mauritius and have an official total area of 70 sq km) for setting up hotels and tourist resorts, for trade, marine studies, or for building a strategic presence in the Indian Ocean, official sources told TOI. North Agalega Island also has an airstrip.
In November 2006, TOI had first reported about preliminary discussions between the two countries for handover of Agalega Islands — which is closer to India than the African country —for development as a tourism and trade hub.
“There is no problem on the issue,” minister Boolell said when asked if the islands could be handed over to India as part of an economic package. Pressed further, Boolell said, “We want investment to flow into Mauritius. India can use Mauritius as a springboard for investment (to Africa) and locally. Now we want India to respond positively and take advantage – and it is true for other friendly countries – of the tremendous potential of the Blue Economy, which is the ocean economy.”
Interestingly, the offer of the islands has been renewed at a time when investment flows into India via Mauritius were threatening to dry up following the proposal to introduce GAAR (General Anti-Avoidance Rules) that aimed at plugging loopholes in the double-taxation avoidance treaty by making disclosure of the source of funds mandatory. Mauritius has maintained that GAAR was creating a lot of uncertainty among investors.
“We want to develop as an ocean basket and ocean market,” said the minister. “The potential is tremendous. We work very closely with India. We should not forget that India has helped us in marking our territories, has helped us in conducting hydrographic studies and in two years we will acquire an offshore vessel from India under the line of credit that India has offered. We are doing several projects together.”
While Boolell indicated that the island nation was open to amendments in the double-taxation avoidance treaty, he denied that there was any misuse.
In 2006, when the offer of the Agalega Islands was first discussed, India was exerting pressure on Mauritius to amend the treaty and sign a Comprehensive Economic Cooperation Agreement. Subsequently, New Delhi relented amidst suggestions that India had a long link with the African country, with a sizeable population of people with Indian-origin.
The discussions between the two countries on the two islands — which may give India strategic depth in the Indian Ocean, especially in its fight against piracy – had then focused on the development of hotels and resorts and upgrading an existing airstrip in the island into an airport.
In 2006, sources had told TOI that there was also an option to develop a port on one of the two islands. There were, however, no discussions on how the arrangement would be structured. At the time when it was first reported by TOI, there were also some protests in Mauritius against handing over the islands to India
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