Mauritian Finance Minister Unveils Interim Budget

by Lorys Charalambous, Tax-News.com, Cyprus

26 May 2009

Deputy Prime Minister and Finance Minister Rama Sithanen has unveiled the Mauritian Interim Budget, containing a fivefold Action Plan for the next eighteen months, designed to combat the effects of the global economic crisis by focussing on three key objectives: saving jobs, protecting people, and preparing for recovery.

Building on the measures contained in the Additional Stimulus Package announced in December 2008, the Budget serves to underline the importance of solidarity in overcoming the financial downturn. Therefore, a series of new levies to be imposed on targeted affluent sectors are intended to mobilise additional resources, vital to achieving the plan’s objectives.

The government is proposing the following new taxes:

• A solidarity levy, which will be introduced on the providers of fixed and mobile telephone services for the next two financial years. A levy of 5% of profits and 1.5% of turnover will apply to all profitable companies.
• The special levy on profitable banks will be increased to 1% of turnover, plus 3.4% of profits over the course of the next two financial years.
• Profitable firms will be required either to spend 2% of their profits on government-approved Corporate Social Responsibility schemes, or to transfer these funds directly to the government to be used in the fight against poverty.

In order to uphold its reputation as a global business centre and to maintain its position on the Organisation for Economic Cooperation and Development’s white list of transparent, cooperative and compliant jurisdictions, the Mauritian Financial Services Commission will seek to enhance its processes for securing the required information on individuals seeking to conduct business in Mauritius. It will also strive to improve its exchange of information with foreign authorities. The Income Tax Act will be amended in order to allow for an exchange of information on non-residents.

Other key measures outlined in the Budget include the following:

Support for businesses

• Micro enterprises will be encouraged to become corporate bodies, in order to benefit from a variety of existing schemes currently operating to assist small and medium-sized enterprises (SMEs). To facilitate this process, fees payable for company registration will be waived until December 2010.
• Training in the printing sector will be promoted by the National Empowerment Foundation (NEF) in order to address a lack of key skills in this area.
• The Mauritius Business Growth Scheme will be established to promote business growth in SMEs.
• An Emergency Export Credit Insurance scheme will be set up for companies in all sectors, facilitating access to export credit from the banks until December 2010.
• The Manufacturing Adjustment and SME Development Fund will be renamed the Saving Jobs and Recovery (SJR) Fund and provided with an additional MUR2bn.
• A line of credit for equipment modernisation for SMEs will be made available to leasing companies through the SJR Fund, until December 2010.
• A “Work cum Training” scheme will ensure that employees, threatened with redundancy in the tourism and textile sectors, will receive training instead. The scheme will run until December 2010.
• A Hotel Reconstruction Scheme, running until December 2010, will enable eligible hotels to carry out reconstruction work, provided that employees are not made redundant during the renovation period.

Support for local industries

• Controls on imported products will become more rigorous.
• The number of contracts allocated to small contractors will be increased.
• The Food Security Fund will contribute MUR350m to fund various projects designed to benefit small farmers, breeders and fishermen.
• Small sugar planters will be entitled to a 20% reduction in cess tax for each of the crop seasons 2009/10 and 2010/11.

Rodrigues

• MUR100m will be earmarked for a specific stimulus package for Rodrigues from the SJR Fund and the Food Security Fund.
• The travel tax to Rodrigues will be suspended until December 2010.
• Available through the NEF, loans of up to MUR150,000 will be advanced to all fishers in Rodrigues prepared to develop a new business. Areas of intervention will include both the agricultural and handicraft sectors.
• MUR22m will be invested in developing the road networks.
• The Trust Fund will disburse MUR6.4m for community projects.
• The scheme for the breeding of goats will be extended to small breeders in Rodrigues.

Tourism

• To accelerate the construction of new hotels and to create jobs, the government aims to adopt an alternative financing approach, allowing individual foreign and Mauritian investors to acquire hotel rooms and villas, provided that they are leased back to the hotel operator.
• Small hotels facing financial difficulties will not have to pay the increased rental charges until December 2010, and rental arrears will be rescheduled and will commence as from January 2011 in five equal yearly instalments. As regards other hotels, the rescheduling period for rental arrears will be three years, although there will be no moratorium.
• The SJR Fund will operate a scheme enabling small hotels and restaurants to improve, refurbish, renovate and reduce their costs through energy management so as to enhance productivity, increase competitiveness and upgrade the level of service.
• MUR200m will be granted to the Mauritius Tourism Promotion Authority, thus enabling it to step up its promotional campaign. These funds are in addition to the MUR110m already allocated as part of the Additional Stimulus Package.
• Non-residents will be allowed to contract a loan in Mauritian rupees in order to finance the purchase of a residential property under the Integrated Resort Scheme (IRS) and the Real Estate Scheme (RES).
• To provide cash flow relief to the IRS/RES promoters, the developer will pay 25% of the land transfer tax at the time of signature and the remaining balance will be payable in three equal instalments over a period of 18 months.

The amount available to stimulate the economy is set to increase to MUR14.2bn for the next eighteen months.

Recommended