On 8th November 2013, the Vice Prime Minister and Minister of Finance and Economic Development, Hon. Xavier Luc Duval, delivered his third budget speech titled “ Building a Better Mauritius –Creating the Next Wave of Prosperity”. At first sight, this budget is not a populist exercise with drastic roll back of subsidies or big changes to the tax net. A more articulate analysis, however shows that it lays the blocks to put the economy on a firm base.
The budget announced by the Minister was delivered with 2013 macro-economic statistics indicating inflation of 3.6%, growth at 3.2%, unemployment rate at 8.3%, and a budget deficit of 3.7%. The economy is marching steadily towards fiscal balance with a public sector debt of 54.8 for 2013.
Focus on fundamentals
From an economic outlook perspective, the measures in Budget 2014 are expected to maintain the year on year economic stability fundamentals, with growth forecast of 3.8% -4.0%, budget deficit of 3.2% and public sector debt of 54%.
At first sight, this budget is not a populist exercise with drastic roll back of subsidies or big changes to the tax net. A more articulate analysis, however shows that it lays the blocks to put the economy on a firm base.
The sustainability and fiscal prudence in turn ensures that the country can spend the needed amounts in terms of building infrastructure. Infrastructure projects of MUR18.4bn for 2014 are key to containing the regression observed in the construction sector.
Creation of new spaces for future regional investment and growth
Mauritius has built its Africa strategy case at the back of being a regionally preferred investment and financial hub. The creation of the announced MUR 500m Mauritius Africa Fund, the Export to Africa subsidy and enhanced support of international events showcasing Mauritius as a gateway will advance this strategy.
The creation of new service frameworks announced in the form of Captive Insurance and Service Impact Exchange comes as a complement to our IFC offerings in this part of the world.
With 20 years of insight as a global business platform, the country has seen the downside of placing reliance on a unique treaty based selling point like in Mauritius –India investment route. Therefore in this budget, it is comforting to see the parallel creation of new hubs such as the aviation, marine services and petroleum storage hubs which will undoubtedly diversify the offering of Mauritius as a regional gateway destination with offerings extending beyond an investment or financial hub product proposition.
The Minister also went on to mention facilitating measures such as the Fast Tracking of major projects and the speeding up of land use and building permits amongst others which will fairly benefit economic stakeholders.
Reinforcing a responsible government footprint
Elements of the budget measures announced, clearly show the Government‟s commitment to make sure that economic transformation programmes –such as business facilitation, competitive legislation, and new avenues of growth –are also complemented by improvements of human capital to make the economy internationally up to par.
While measures around talent management, promotion of SMEs, and the continued support of the Green Economy are not resolutely new, the introduction of Social Impact Bonds as a social funding structure is clearly innovative for Mauritius. If implemented, this pioneering model which has been successfully used in the US, will ensure that government will pay or reward an NGO only if the program meets its goals. The resulting benefits cannot be ignored for the effectiveness of our social welfare system.
No change in the tax basket
There is no change in the tax policy of Government. This sends strong positive signals to investors both domestic and foreign since the Mauritius tax system remains stable, competitive and transparent. The corporate and personal tax rates remain at the low flat rate of 15%. VAT rate as well is maintained at 15% and remains the main source of tax revenues for the Government. Total revenue from taxes is expected to be MUR74bn representing 86% of total revenues.
With a view to continue positioning Mauritius as an IFC of substance, Government will provide greater flexibility for GBL1 companies to deal with residents and to acquire property in Mauritius. To ensure adherence to international standards with respect to exchange of information, Mauritius will adopt the Multilateral Convention on Mutual Administrative Assistance in tax matters developed jointly by the Council of Europe and the OECD.
Government will modernise the administration of revenue laws. A Tax Administration Bill will be introduced that will incorporate into one piece of legislation all administrative provisions which will be in line with best international practice and will also provide for regulation of tax representatives and tax agents.
Overall the Budget 2014 offers the rational benefits of stability and prudence needed in a slowly recovering global economy, with measures to create a new and improved economic space waiting for the Africa rising to mature and for our main export partners to bounce back.