Status quo till DTAA with Mauritius is renegotiated: FM

NEW DELHI: Seeking to assuage investors' fear, Finance Minister P Chidambaram today said that status quo on taxation of investment from Mauritius will continue till the renegotiation of Double Taxation Avoidance Agreement (DTAA) with that country.

On the contentious issue of Vodafone tax dispute, he said the government aims to resolve the issue and will take a view appointing conciliator.

"I said so," Chidambaram said when asked whether status quo continue till DTAA is renegotiated.

"We will not do anything unilaterally involving two countries. Domestic law will apply where domestic law applies, The treaty will apply where treaty applies," he told PTI in a post Budget interview.

"We have been trying for 6-7 years. Negotiations have been underway," he said.

"There are number of aspects in treaty. The successive governments have said it needs to renegotiated, including some cases of misuse that come to the notice of the Tax Department," he said.

The DTAA with Mauritius is over 30-year-old treaty which has been used by investors to save taxes.

India receives 42 per cent of its FDI routed through Mauritius. Likewise about 40 per cent of the FII fund flow in the country are believed to be routed through the island nation. A large majority of them are third country investors which use the DTAA for saving capital gains tax.