Reaction from Philip Bond
Tax Senior Manager
PricewaterhouseCoopers
"Taxes, after all, are the dues that we pay
for the privileges of membership in an organized society."
Franklin D. Roosevelt
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No significant new reforms or major changes to tax policy were announced in the 2008 National Budget, delivered on 6 June 2008. This provided strong reassurance that the tax reforms and measures previously introduced were having the desired effect, and, were creating sufficient resources to meet current and proposed expenditures. As a result, the Budget only appeared to deliver fine tuning in a few areas – which was extremely encouraging.
PricewaterhouseCoopers described last year’s Budget measures as, ‘largely positive’ and ‘congruent with the Government’s long term objective’ which has appeared to be the case. The lack of any significant tax policy changes in view of the planned announced expenditures, in people investment and infrastructure, showed that they were keeping pace with the strengthening economy and the focus remained on increasing investments, sustaining high growth rates and reducing unemployment.
Tax revenues increased to Rs.46.4 billion in 2007-08 (Rs.38.5 billion in 2006-07) which is indicative of a strengthening economy, greater compliance and improved administration and collection. Notably, the increasing GDP growth rate of 5.5% in 2007-08 (5.1% in 2006-07) and the falling domestic inflation of 8.8% in 2007-08 (10.7% in 2006-07) created significant increased tax revenues.
In addition, the two tax amnesties six-month schemes introduced in last year’s Budget, the Tax Arrears Payment Incentive Scheme (TAPIS) and the Voluntary Disclosure Incentive Scheme (VDIS) provided a very lucrative source of funds for the Country.
Some other notable points in this year’s Budget are that:
- Several Customs tariffs were reduced. This was, however, likely to have been the result of pressure from institutional investors rather than a generous, unsolicited measure. Of notable concern was the removal of Customs Duty on foodstuffs and agricultural products and the impact of this on local suppliers;
- The registration duty payable on an IRS residence is now the higher of 5% of the property value or USD.70,000; We hope that this will not be applicable to already approved projects.
- the standard rate of VAT remained at 15%, despite the expectation from many that it was likely to be increased to meet the increased expenses identified by the Pay Research Bureau;
- Mauritius remains a low tax regime, with corporate and individual flat tax rates at 15%; and,
- Land transfer tax will apply to the transfer of shares in companies holding immovable property and new rates were introduced for land transfers exceeding Rs.50 million of 15%, if transferred within five years, or else 10%
From a tax perspective, the Budget was a very uneventful one, with fine tuning in a few areas only.
The introduction of the Advance Payment System (APS) as from 1 July 2008 will provide the Country with more ‘fiscal space’ as the accelerated collection of corporate income tax revenues provide more liquidity for the Government.
Some relief was afforded to retired people, with the income tax threshold increasing to Rs.285,000 in case of no dependants and to Rs.395,000 where there is one dependent.
In the 2007-08 Budget it was a little disappointing that whilst the top personal income tax rate was reduced to 15%, the income tax thresholds were not increased to alleviate the difficulties encountered by those at the lower end of the salary scale. This has now been rectified with a much welcomed increase in all the income tax thresholds by Rs.25,000. It would be further encouraging if annual increases could be ratified in line with inflation. |
