After Swiss Leaks, Panama Papers and Paradise Papers, come documents from Mauritius over 200,000 emails, contracts and bank statements that show how the island nation was used by a long list of corporates to facilitate their partnerships with multinationals and, without paying any capital gains tax, remit profits as Foreign Direct Investment (FDI) to India.
At the heart of the 18-country collaborative investigation by the International Consortium of Investigative Journalists (ICIJ) and The Indian Express is data from Conyers Dill & Pearman, an offshore specialist firm which started operations way back in 1928 from Bahamas and in 2009 from Mauritius to cater to investments being routed to Africa and Asia.
The Double Taxation Avoidance Agreement (DTAA) was signed between India and Mauritius in 1982. Under this, any entity could apply for tax residency and pay zero capital gains tax. This became the principal reason why Mauritius emerged as a top channel for investments being routed into India. However, after 33 years in which there were several allegations of round-tripping and treaty abuse, Indian tax authorities amended the DTAA on May 10, 2016 and, for one, imposed capital gains tax, in a phased manner for two years, and fully applicable from April 2019 on.
That changed the game for companies like Conyers. Also, companies 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.
Beginning today, The Indian Express investigation will bring details of how the Mauritius route was used by corporates. These include:
* Records of Conyers read with those of Paradise Papers show how Religare Enterprises Ltd (REL), a listed company in India, routed funds into a Jersey firm owned by Malvinder Singh and Shivinder Singh. Details confirm how the Singh brothers and companies promoted by them were incorporated in tax havens and raised funds, invested in Indian entities and routed these.
* Conyers was legal facilitator between Pune-based real estate company, Kolte Patil Developers Limited (KPDL) and Portman Holdings LLC, a US-based real estate investment company for the construction of several residential projects in India. There are details of the India Real Estate Fund of $200 million being announced in 2010-2011 in which the two companies collectively invested $20 million.
* Records show dealings between a commodity trading giant and Jindal Steel and Power Ltd over ownership of four bulk carrier vessels through a Mauritian company Pancore. In May 2012, this company placed orders with Chinese builders for four bulk carriers for $108 million.
* Conyers was special legal counsel for iYogi Ltd, the Mauritius holding company of its India and US operations on its proposed NASDAQ listing in 2011, which didn t materalise. Eventually, a court ruling in 2018, almost shut down the company.
* 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.
Responding to an ICIJ questionnaire, Dharmendar Sesungkur, Mauritius Minister of Financial Services and Good Governance, said: The World Bank, the International Monetary Fund as well as the OECD…are all unanimous to recognize that Mauritius is a cooperative and clean jurisdiction.
Senior officials from the Indian Ministry of Finance s FT&TR (Foreign tax & Tax Reform), however, spoke on the condition of anonymity to the ICIJ and The Indian Express and admitted that the post 1983 scenatio (when the original DTAA with Mauritius was signed) certainly led to treaty shopping.
A key Finance Ministry official said: Due to this treaty shopping, no taxation took place. It was so significant that almost a third of FDI came through Mauritius. So there was quite a bit of concern raised in India. An effort was started in 1993 to revise the treaty. There was strong resistance from Mauritius. They were benefited in the sense that lots of support and infrastructure like accounting firms and firms that set up companies and get income from that. So Mauritius was not ready to renegotiate. Later, they agreed to join renegotiations but didn t agree to change it. In 2016, we convinced them.