CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Seychelles Budget Increases Taxes To Attain Debt Target

Seychelles Budget Increases Taxes To Attain Debt Target

by Lorys Charalambous, Tax-News.com, Cyprus

17 December 2014


In his 2015 Budget Speech on December 15, Seychelles Minister for Finance, Trade, and Investment Pierre Laporte has had to announce further tax-raising measures, so as to ensure future fiscal sustainability.

The Government's medium-term fiscal strategy, first put in place in 2008 following a default in debt payments and including an International Monetary Fund-agreed target to cut its debt-to-gross domestic product (GDP) to below 50 percent by 2018, has been thrown off course by global economic uncertainties.

As a result of those external pressures, both of Seychelles' two major industries, tourism and manufacturing (canned tuna and brewing), suffered slowdowns and provided lower business tax revenues, but eventual tax collections have been rescued in 2014 by higher value-added tax (VAT) and import duty receipts held up by increased retail sales and domestic construction activity.

The Government's revised projection for total revenue, excluding grants, in 2014 is SCR5.9bn (USD414.5m), 7.6 percent higher than in 2013. This, Laporte indicated, is a much more favorable fiscal outcome than could have been expected, given the global economic situation.

He warned, however, that, on a medium-term basis and without additional tax measures, Seychelles would be unable to reach its targeted debt/GDP ratio, and that he would therefore have to budget for increased total revenue excluding grants in 2015 of SCR6.2bn.

To bolster tax revenue, while also reducing excessive alcohol and tobacco consumption, Laporte is to hike excise duties by 20 percent on all drinks with an alcohol content in excess of 16 percent, and by 50 percent on all tobacco products. The increases will apply on both imported and local products.

In addition, the Minister increased the levy on privately registered motor vehicles by 50 percent and doubled vehicle testing fees, while also raising road tax.

Announcing measures to boost tax compliance in 2015, he disclosed that, with the current level of tax arrears due by businesses at SCR219m, the Government will implement an arrears recovery plan from January 2015 that proposes, among other things, an amnesty on penalties due on tax arrears.

The amnesty will apply on arrears due as of December 31, 2013, with 100 percent of penalties to be waived on arrears cleared by May 31, 2015; 50 percent of penalties to be waived on arrears cleared by August 31, 2015; and 25 percent of penalties to be waived on arrears cleared by October 31, 2015. To complement this, there will also be a more aggressive stance on debt collection.

Furthermore, to facilitate payment of taxes, online tax services will be expanded in 2015 to include the submission of business tax and presumptive tax returns. As from the first quarter, taxpayers will be able to register their businesses and update their business status and contact details online.

The Government will allow small businesses to choose either the presumptive tax system (based on 1.5 percent of their turnover), which was introduced in 2014, or follow the normal business tax system. Noting that the small business category (of firms with a turnover of less than SCR1m) includes micro businesses, the Government is to work on a new structure to be introduced in 2016 to reduce their tax compliance burden and encourage them to remain in the formal economy.

Laporte also announced changes to VAT for 2015. For example, from January 1, the threshold for mandatory VAT registration will be lowered to SCR2m, while, to boost sectors like tourism and construction and to improve cash flow management, the VAT deferred payment facility will be extended to cover all imports to be used for a project during the construction phase.

Finally, the Government considers the international financial services sector as having significant potential. Laporte's Ministry has recently initiated consultations with key stakeholders to develop a Financial Strategy for Seychelles. Progress has also been made in assessing the feasibility of introducing a framework for Islamic finance in Seychelles, with recommendations due in early 2015.

Laporte noted that the tougher stance of the OECD on offshore financial centers does not appear to have had a significant negative impact on Seychelles in 2014. The Government's most immediate priority for the financial sector, however, is to restore Seychelles' compliance with OECD standards on tax information exchange by mid-2015.

The Government has strengthened cooperation with the country's international partners, and, apart from signing the agreed Foreign Account Tax Compliant Act intergovernmental agreement with the United States, Seychelles also expects to sign the OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters early next year, following parliamentary approval of an amendment to the Seychelles Revenue Commission Act.

TAGS: compliance | tax | investment | small business | business | value added tax (VAT) | tax compliance | law | financial services | budget | corporation tax | tax thresholds | fees | excise duty | offshore | manufacturing | legislation | import duty | micro business | construction | penalties | islamic finance | retail | legislation amendments | Seychelles | services | Investment | Invest | Investment | Tax

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »