Tax deal with Singapore stalled

Efforts to initiate a double taxation avoidance agreement(DTAA) with Singapore has hit a roadblock.This is because of Singapore's reluctance to include an information-sharing clause in the agreement.

India has offered a DTAA to Singapore on the lines of the Mauritius DTAA. Officials told Business Standard, today though Singapore was keen on the DTAA, it refused to include the information-sharing clause.

Officials pointed out India was being liberal in extending the benefits of the Mauritius DTAA to Singapore since there was a case for reviewing the DTAA with Mauritius.

An official said the finance ministry was keen to include the 'limitation-of -benefit clause' to check a company from a third country taking advantage of the taxation treaty.

The finalisation of a bilateral comprehensive economic cooperation agreement(CECA), on trade and investment is also pending on account of outstanding issues,including concessions in sectors like financial services and telecom.

These concessions are being sought by Singapore. Both sides have failed to resolve these issues despite twelve rounds of meetings.

Prime Minister Manmohan Singh held a meeting with Finance Minister P Chidambaram and Commerce Minister Kamal Nath last week.

He is understood to have directed Cabinet Secretary BK Chaturvedi to finalise the framework of the agreement with the secretaries of the two ministries. Commerce ministry officials said if the framework was finalised, the CECA could be implemented as early as May 1, 2005.

Officials said India was willing to accede to some demands of Singapore, such as allowing its banks to open up to 15 branches in five years.

India is,however, reluctant to agree to Singapore's demand for excluding the clause of binding the FDI cap on telecom "subject to domestic laws and regulations".

"We want to include the clause 'subject to domestic laws and regulations' in order to ensure that if for some reason the FDI cap is lowered in future, then we can revise the provisions of the CECA," an official said.