Dheerend Puholoo, Tax Director
The 2014 Budget (the “Budget”) presented by The Honourable Minister of Finance and Economic Development, Mr Xavier-Luc Duval is based on a two pronged strategy:
- to invigorate investment and growth; and
- build a modern and inclusive society partly based on enhanced social measures.
Tax revenue was short by Rs4.3bn for the fiscal year 2013 against an estimated amount of Rs71bn. The principal factor contributing to this shortfall was due to a dual decline in income tax and value-added tax.
In line with the global policy for a cleaner environment, green tax is becoming a common feature. Under this policy consumer behaviours can be changed by appropriate fiscal measures. The Budget has further enhanced the green philosophy espoused under the Ile-Maurice Durable concept. In this spirit, the current CO2 threshold has been lowered from 158 g/km to 150 g/km.
Consolidation of the social safety nets is another theme of the Budget. To alleviate any potential income disparity, and promote home ownership a VAT refund will apply for low income families.
Another VAT measure likely to support households is through a reclassification of a number of essential products from exempt to zero rate. It is expected that such a change will impact on the prices of the products through a higher recovery of input VAT. However, it is yet to be seen to what extent the benefit of this measure will be passed onto the consumer.
Tax deduction at source (TDS) has been extended to cover certain consultancy services and interest payments where these are not tax exempt. Since its introduction in 2006, TDS has significantly helped widen the tax base leading to a better collection.
Fees received by a non- resident for the provision of services to a resident of Mauritius would be taxable, irrespective of the location from which the services are provided. This is however subject to the provisions of the Double Taxation Treaty, if applicable. This measure brings the local and the foreign professional on the same footing from a tax perspective. As in the past, excise duty has been increased on tobacco and alcoholic drinks. In addition a one cent increase in excise duty on sugar content of soft drinks estimated to bring in additional tax revenue of Rs120m.
Commercial banks will most likely suffer a higher effective tax rate with the change in the special levy based on chargeable income.
The introduction of the Tax Administration Bill is a positive step towards a better tax administration in line with other developed tax jurisdictions. Hopefully, there will be an efficient implementation of the Act in the future by the Mauritius Revenue Authority (“MRA”).
SMEs being one of the major contributors to the economy, a simplified tax return and record keeping requirement will lower compliance burden. Other measures are a simplified Customs Administration Penalty System and the harmonization of the payment dates for various taxes to the MRA.
Overall, the tax measures aim to simplify the tax administration that is likely to deliver an effective tax collection and efficiency. At PwC we are supportive of such a system .