Multinational enterprises exploit gaps in international taxation rules to artificially shift their tax liability to low-tax countries. Huge empirical challenges arise in understanding international tax loopholes due to limited coverage of tax haven countries in available data sources and even more limited experience of plugging tax loopholes internationally. This paper contributes to both these areas by examining foreign investments and international tax loopholes through new administrative transaction data from India. Gravity models of Foreign Direct Investment (FDI) inflows to India show a stark outlier - Mauritius - with which India has a bilateral tax treaty that contained a loophole allowing both Indian and foreign firms to avoid capital gains tax on profits of company sales. In 2016, India and Mauritius agreed to reform treaty, removing the loophole. and changing effective tax rates to investments in India through Mauritius. Following the reform, we show that the volume of FDI flowing to India through Mauritius falls, compared to FDI from other routing countries. Firm-level micro data confirms the finding that foreign investors reduced their investments through Mauritius, with some diversion to investments from other tax haven channels. Indian firms who had received FDI through Mauritius before the policy change did not experience a relative fall in total FDI inflows.