Mauritius is an Island in South Indian Ocean, about 300 miles off the coast of Madagascar. It is an odd former British Colony that mostly speaks French and is almost 80% ethnic Indian. It is interesting to see Indians greeting and speaking to each other in French. It has a population of a little more than a million. On average, a Mauritian is three time as a rich as an Indian.
Mauritius was originally a French colony and was taken over by the British during the Napoleonic War without firing a shot. The surrender agreement required keeping the French character of the island.
Mauritius for a long time subsisted on sugar plantations, which was given the entry into common market on preferential basis. That has been phased out. They tried to diversify with tea plantations, but that was not to be. It now has Financial Services and tourism as the mainstay of the economy. Tourism is understandable because of beautiful beaches, and the safe out-of-the-way place. Emirate flies three 380 flights every day to Mauritius. It also gets flights from London, Paris, Mumbai, Delhi and Singapore.
Financial services is odd because it solely depends on India’s wrong-headed FDI policies, which forces investors to come to India through Mauritius. India/Mauritius Double Taxation Avoidance Treaty makes investment from Mauritius tax-free. This industry has become 11% of Mauritius’s economy.
In 2012, then Finance minister pushed through parliament a vaguely worded law called GAAR (General Anti tax Avoidance Rules) which tried to differentiate sham investments from Mauritius and made them illegal. The problem is that it never defined what it meant by “sham”. It imposed many conditions, but never clearly defined what one has to do to prove one’s bonafides. One of the conditions imposed is that you have to have presence in Mauritius. It never fully defined what constitutes presence. Legal advice is that one must go to Mauritius and hold board meetings there at least once a year.
So I am here for this annual ritual, at a great expense and big wear and tear on my body. It took only 2 hours to hold four board meetings for four entities that we have in Mauritius. Which mostly was ratification of all the previously passed resolutions. At the end, a copy of my passport showing I am physically present is attached to these.
For the life of me, I am unable to understand the rationale or logic here. Modi has been in power 20 months. I was hoping a quick action from him. Jayant Sinha waxes eloquent about making Mumbai a financial center. With RBI, SEBI, DCA and Finance ministry making conflicting regulations that affects funds, I wonder how is that even possible.
I pray for India while I suffer this absurdity.