Bilateral Tax Treaties and Foreign Direct Investment in India: Evidence from Mauritius

The international tax treaties have significant impact on the flow of Foreign Direct Investment (FDI) of a country. The Double Taxation Avoidance Agreement (DTAA) between India and Mauritius has served as a gateway to funnel FDI to India through Mauritius. During last twenty five year there is a phenomenal increase of FDI inflow to India from Mauritius. Because of DTAA the offshore companies are able to avoid and evade taxes arise from making securities transaction. Mauritius is used as mailbox to invest in India by third country companies. The liberal fiscal and economic policy of Mauritius along with DTAA facilitate the third countries companies to route their venture to India through Mauritius. 36percent of the total FDI has in flowed from Mauritius during 2000–14. The total FDI flow is 80808.09 million US dollar during this period. Similarly in the recent time the FDI from India has significantly increased to Mauritius. Indian investors are using Mauritius as a launching pad to target African market. The total FDI out flow to Mauritius is 4428 US million $ which 12percent of the total FDI out flow from India in the year 2013–14. Against this back drop the present study is based. The objective of the study is to study the role of bilateral tax treaties on the flow of FDI between India and Mauritius.