Tax Perspective


By Anthony Leung Shing, Tax Partner and Dheerend Puholoo, Tax Director

 

 

The Honourable Minister of Finance and Economic Development forecast a GDP growth for 2013 at 4%. Much of this objective rests on the Government’s ability to implement a comprehensive strategy on Africa, the adoption of new technologies to build capacity, as well as sound macro-economic management.


With the African continent outpacing many of the world’s developed economies in terms of growth, the Minister is further re-enforcing the concept of the Mauritius gateway into Africa. In line with previous years, he announced plans to enlarge our treaty network with other African countries.  However, a new measure in this year’s budget is the granting of Freeport status to companies wishing to carry out manufacturing for export to Africa only, that is, such companies would be exempt tax. The Government is innovating through the integration of manufacturing into the gateway concept. This is a much needed addition to the traditional investment holding structures which Mauritius is so often used for Africa. Hopefully, this would help to attract global manufacturers wishing to take advantage of Mauritius’ tax free access to regional markets in Africa. However, key challenges remain air and sea access, people resources and skills.  


The financial services sector performed well in 2012, with a growth of 12.4% in the global business. To maintain this cap, the Government is introducing new schemes such as tax exempt status for funds not requiring the benefit of Double Tax Treaty or the Regional Treasury Centre concept. Further, in an effort to promote higher value added activities, the Government has sent a clear message to the industry by making commercial substance a pre-requisite for qualifying for a Tax Residency Certificate in Mauritius. This should go some way to address some of the concerns that our Tax Treaty partners may have but it remains to be seen whether those substance criteria would be enough. Whilst this move is welcomed, more could have been done to attract new international players such as asset managers and other professionals to improve the value chain and develop new service offerings.
 

Tax revenue increased by 9.2% in 2012. In view of the apparent success of the tax amnesty schemes, the Minister is proposing to re-introduce the schemes for another nine months but with some further improvements and refinements. Hopefully, the new scheme would not force tax payers to withdraw their cases on appeal in order to benefit from a waiver of the penalties and interests. Negotiations on the tax assessments would be a fairer approach.
In terms of tax administration, the Minister introduced new measures to ease the burden of compliance for small enterprises by increasing the threshold for VAT registration to Rs4m whilst exempting persons with a turnover of less than Rs4m from filing Advance Payment System and Current Payment System. Other measures such as mobile payment service offered by the Mauritius Revenue Authority (planned for the end of 2013) would further reduce the compliance time.


Overall, the tax policy appears to promote investment into targeted areas of the economy as well as into capital and new technologies. The Minister used a mixture of traditional and new measures to shape the investment decisions. However, Africa has many challenges, and the re-positioning of the economy towards Africa may be slow.