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No change in tax treaty with Mauritius: Jaswant

BS Economy Bureau in New Delhi

Finance Minister Jaswant Singh has told the joint parliamentary committee on stock scam that there was no proposal to alter the tax treaty with Mauritius because he did not feel that there has been any massive outflow of capital from the country under the treaty.

In an "interaction" with the committee he said on Wednesday that the government cannot discriminate against any one country.

Committee chairman SPM Tripathi told reporters that the minister added that the Double Tax Avoidance Agreement was signed not only on commercial considerations but also to develop friendly relations with the neighbouring country.

Tripathi said the minister informed the committee of the circumstances under which the Centre had to pass an ordinance to repeal the UTI Act.

Facing a barrage of questions on the issue, Jaswant Singh also said that necessary amendments in the UTI ordinance can be brought in, if the JPC report as accepted by Parliament, suggests a different course of action for UTI.

Indicating a difference of opinion of the JPC with the ministry's stance on UTI, Tripathi said committee had only taken note of the ministers' justification and said it was up to the members to accept or reject it.

The JPC had decided to call the four finance minister, who had occupied office since the last scam of 1992 before finalising their report, to be tabled in Parliament in the winter session. Tripathi said an 8 member drafting committee is working on the report.

He said the committee felt that the present scam had occurred because the government did not take effective or sufficient action to punish the culprits.

As a result the capital market players developed the feeling that transgressing of rules would not land them in trouble.

In his response the minister acknowledged that there had been deficiencies in monitoring, especially by the regulators including the Reserve Bank of India, and said there is a need for continuous vigil to prevent excessive volatility and another scam.

But he cautioned against running down the achievement of the domestic capital markets in general and berated the tendency to run them down for the activities of a few operators.

Singh also took note of the concern by the members that there was a lack of coordination between the regulators and said the government has taken up the task of completing the promises made in the last action taken report.

He also defended the role played by the finance ministry saying unlike the scam of 1992, the ministry had distanced itself from the actual running of the capital markets.

While P Chidambaram will appear before the JPC on Thursday, Yashwant Sinha and Manmohan Singh are slated to appear on November 20.

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