Close

Mauritian Budget 2017 : end of a benign tax regime?

From last weeks budget statement there were 2 points that leapt out at me :

The first was the wealth tax , whereupon those with an income exceeding MUR3.5 million , including dividends,  will pay an extra 5% on all income above this MUR3.5 million threshold. This applies to all residents , including expats.

The second, and one which I feel could have far more consequences and possibly form part of a hidden agenda, is the intention to have Mauritian citizens declare their total assets and liabilities.

It can be argued that the country is in dire need of revenue. Notwithstanding the cost of the BAI affair, the Singaporean Court of Arbitration's ruling in favour of ‘ Betamax' to the tune of MUR5 billion plus a staggering amount of  interest for each day that the sum is not settled, leaves a huge blackhole in the countries  finances.

How can that hole be filled?

Since the crash of 2008, many countries have come to realise that they require more tax revenue to balance the books, and there has been a consequent drive to close tax loopholes. Indeed India’s closing  of the Indian Treaty with Mauritius is an example of this.

Mauritius though has had a benign tax regime and there has been no need for such loopholes or tax planning mechanisms. But is that going to change?

If the MRA can identify what the 'High Net Worth’ citizen has in assets then it gives it the information to calculate how much revenue, for example,  can be gained by introducing Capital Gains Tax, or Inheritance Tax.  In terms of politics such an introduction would be seen as only effecting the wealthy, the rich of the country. What a vote winner! It would not effect the majority of the population. In the UK’s recent election 40% of the population voted for a Labour Party that was promising the earth by taxing the rich. So why not here?

As previously stated the concept of ‘tax planning’ as known in the UK and elsewhere, which facilitates the  legal avoidance of one’s tax liability through the use of Trusts has not been widely practiced in Mauritius.

The use of ‘trusts’ is certainly not as complicated or as expensive as many people may imagine. No doubt there will be those that will argue that such a progressive tax regime could never be introduced here, but is it not prudent to consider it as being a distinct possibility and as such consider ways to legally protect one's liquid assets , particularly those that may be held overseas?

The Motto of Mauritius is "Many People - One Nation"  yes it may seem bad to tax the high income earners but they are probably like most countries a small percentage of the working population.  However when you look perhaps at the demographics of these high earners are they not the CEO's and senior management of companies and also probably the list would include many actually in government.  So would a government devise a plan to effectively tax each minister in power and those friends of the government who run the big companies here that help sustain the economy.  I can see many of the top lawyers and accountants getting more business as there will be ways to avoid this tax as there are in other countries. But the people of this nation always have a choice its called the Ballot Box and when the next election comes around instead of voting the same few back into power again despite your anger at their decisions and policies you have the right to vote for alternatives etc.

The wealth tax as you called it is actually known as the 'solidarity levy' and has been introduced twice in the past and later removed.

However whether it had any impact on the state's coffers is another story. Today, this levy concerns only about 4,000 people on the island and the estimated net revenues it will bring is only around MUR 200 million.

Regarding this budgetary measure, it's also interesting to note that bank interests will be left out. With the large number of loopholes in the financial sector, it will be a child's play for accountants and tax specialists to lessen or even negate the impact of this measure in many cases.

On another note, while there is an urgent need to address the burning issues of wealth gaps and social inequalities, you do have a point in that the government is in dire need of money, in large part due to their many reckless and ill-advised policies and decisions.

Moreover, due to possible anticipated general elections around the corner, many of the decisions in the last budget do carry a varying dose of populism.

However, as of now, all these remain as budgetary announcements and like it's the case every year, a majority of the measures will miss the implementation phase.

The coming weeks/months will no doubt shed more light on whether the plethora of measures will be implemented or whether the current govt will even be still in power to implement them.

You are assuming there is a better choice of candidate to vote for. Unfortunately, the populace is in no position to make an informed decision. You need an honest person at the top, and they are unlikely to win a vote because people prefer a nice story to reality.
Barry

New topic

Expatriate health insurance in Mauritius

Free advice and quotation service to choose an expat health insurance in Mauritius

Moving to Mauritius

Find tips from professionals about moving to Mauritius

Travel insurance in Mauritius

Enjoy stress-free travel to Mauritius

Flights to Mauritius

Find the best prices for your flight tickets to Mauritius