Mauritius Government Explains New Tax System

by Lorys Charalambous, Tax-News.com, Cyprus

01 October 2007

Promoting growth while striking a fair balance between efficiency and equity is the rationale behind the New Tax System in force in Mauritius for fiscal year 2007- 2008, according to Minister of Finance and Economic Development, Rama Sithanen.

Sithanen was speaking at a recent seminar to explain the government's comprehensive tax reforms, designed to "sensitise" stakeholders with regard to the current tax systems.

In examining options for reform while reducing government debt and deficit, Sithanen said that he had rejected measures that would have unfairly penalised low wage workers, such as an increase in VAT, and opted for "fairer and equitable measures".

Sithanen stressed that the new fiscal model ensures that social measures benefit the more needy, especially through the Empowerment Programme, social aid, and new social measures. On the other hand, the model also caters for growth, with its lower tax rates.

The Mauritius government has recently pushed through comprehensive income tax reform, designed to be increase the system's transparency.

In the 2007 budget, announced in June, Sithanen told Parliament that a 15% flat corporate income tax would be introduced, as the government strives to create conditions for "robust, sustained and inclusive growth" whilst opening the economy, facilitating business, and accelerating the transition to global competitiveness. This measure, which also applies to personal income, was brought forward by two years to July 1, 2007, after the government decided to abandon initial proposals to phase in the corporate tax cut to 20% from 22.5% this year, and finally to 15% in 2009.

In a bid to simplify the tax system, many exemptions have been overhauled, and the numerous deductions in the old tax system have been consolidated into new income exemption thresholds, with the number of tax bands reduced to just two.

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