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The International Monetary Fund indicated on January 11 that Seychelles will need to take further measures to increase tax revenue over the medium term.
With strong economic activity continuing in Seychelles, the IMF disclosed that it expects the country's primary surplus – the surplus before accounting for the cost of interest on debt – is to reach three percent of gross domestic product in 2016, despite the expansionary impact of the fiscal initiatives announced in the State of the Nation Address (SONA) in early 2016. Those measures included personal income tax (PIT) cuts and increases in pensions and the minimum wage.
The IMF confirmed that "the SONA initiatives entailed substantial fiscal costs, around three percent of GDP on a full-year basis." The PIT reforms were designed by the Government to reduce the tax burden on low-income earners and, on a phased basis, make the tax system more progressive.
The IMF noted that the proposed 2017 Budget includes "some measures to moderate the impact of the SONA initiatives," including a new property tax on foreigners' land ownership in Seychelles, and realignments to the presumptive tax rate and to the tax rate on profits made by individual businesses.
However, its opinion was that "additional and permanent measures to boost revenue and contain expenditure will be needed to ensure a steady debt reduction over the medium term."
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