I read with interest an editorial by Raj Meetarbhan regarding the threats to the India-Mauritius tax treaty. Of course, it is good for anyone (or any country) to try to stick any advantage (even if undue and unfair) that it may have. But that should not turn that person (or country) into one that necessarily depends on that advantage for its very survival. I have headed the operations of three offshore management companies over the past decade. And I can assure you that even the COMPLETE scrapping of the India-Mauritius treaty would in no way have killed my business. It?s just about having in place a strategy that does not rely on a single factor, be it a supplier or a customer or a product. This is one of the most elementary lessons in all business courses.

The point in the India-Mauritius treaty is that it requires India to act to its detriment in order to give Mauritius an unfair advantage over many other offshore jurisdictions. India is indeed foregoing hundreds of millions every year by way of forfeited capital gains taxes and we keep insisting that India should continue to forfeit these taxes just because this is (apparently) THE critical factor that enables our offshore sector to survive. When India has revised its treaties with other countries (e.g. the UAE), why do we need to keep ?begging? on maintaining the added advantage, especially that it acts to the detriment of India? Should we not rather aim at competing at par with other jurisdictions for our own long-term benefit?

It is a fact that investors using Mauritius manage to avoid capital gains BOTH in India and Mauritius because, under the India-Mauritius treaty, Mauritius has the right to tax these capital gains but then there are no capital gains in Mauritius. The matter would be different if Mauritius effectively taxed these capital gains. In the current scenario, it?s a bit like you ask a friendly farmer to knowingly throw away ten litres of milk because you will in the process manage to recover one litre to feed your own child. In this ?milk scenario?, the remaining nine litres of milk benefit neither Mauritius nor India ? they are recuperated by people who use Mauritius as an investment platform for their benefits.

The way many operators in Mauritius keep insisting that India accepts to forego taxes to enable our offshore sector to survive reminds me of the way that our (so far inefficient) sugar industry was heavily relying on the (apparently) permanent sugar protocol that has now been terminated. It indeed required a termination of the advantages under the sugar protocol to force us to rethink our sugar industry to make it more competitive. If a revision of the India-Mauritius treaty would indeed ?kill? our offshore sector in its current form, then the sooner this ?chateau de cartes? crumbles, the better. It would at least force an innovative offshore sector to emerge that would not rely on undue advantages provided by the India-Mauritius treaty coupled with the absence of capital gains tax in Mauritius. Hopefully, we will then be able to really test the Mauritian sense of «débrouillardise» and prove that we can indeed compete internationally by providing innovative financial products and an impeccable service. What you see as «La menace des Indiens» is in fact an overdue reminder that Mauritius must learn to depend on itself.

<B>Rohit RAMNAWAZ</B> Managing Director African Links Limited