Tax perspective
by Dheerend Puholoo
Associate Director, Tax
The Budget 2017 provides a number of measures that, among others, aims at fostering sector growth and ushering a new social paradigm. It also sets the objectives to reduce the time for resolution of tax disputes and increasing tax collection.
Tax Measures
The Hon. Prime Minister and Minister of Finance and Economic Empowerment has introduced the concept of Negative Taxation. This measure aims at granting financial support to low salary earners. While the intention is laudable the administration process for the Mauritius Revenue Authority (MRA) may prove to be burdensome.
On the other hand, resident individuals having a taxable income and dividend income exceeding Rs3.5m will have to pay a 5% solidarity tax on the excess amount. In short, Government aims to raise more tax revenue from high income earners. However, this represents a double taxation on dividend income. It may also adversely impact investments on the Mauritius Stock Markets.
In the wake of the challenges from the OECD and European Union (EU), the Minister has announced measures enhancing the substance requirements for companies holding a Global Business Licence. This is a positive step, but it may not be sufficient to meet the global challenges. We consider that Government should instead endeavour to attract more active business in the global business sector.
Companies involved in exports of goods will now be taxed at the reduced rate of 3%. Accelerated capital allowances and double deduction will be available to companies in respect of capital expenditure incurred on research and development. These are welcome measures that will boost these activities.
Other fiscal measures to promote specific sectors include an 8-year tax holiday to companies engaged in the manufacturing of pharmaceutical products, medical devices, high tech products, and the exploitation and use of Deep Ocean Water for providing air conditioning installations, facilities and services.
Administrative changes
The Assessment Review Committee (ARC) will now be required to fix hearings within two months of representations by taxpayers. The ARC will also have to give its decisions within four weeks of the hearing. This is a good initiative to reduce the backlog of cases and expedite the resolution of tax disputes. Hopefully, the ARC will be adequately equipped to meet these objectives.
The Alternative Dispute Resolution Panel (ADRP) will deal with assessments under the Gambling Regulatory Authority Act as well as on Pay As You Earn (PAYE) and Tax Deduction at Source (TDS). The ADRP is in place since May 2017. It would, however, be more desirable if the panel was constituted of members other than MRA officials.
The re- introduction of the Tax Arrears Payment Scheme and Expeditious Dispute Resolution of Tax Scheme for another year is an opportunity for taxpayers to settle their long outstanding debts and avoid penalties and interests.
The registration of Tax Agents is a welcome measure that will enhance the quality of service and professionalism within the tax industry.
To conclude, the Budget provides incentives aimed at promoting a number of sectors. More significantly, it introduces measures to accelerate tax collections.
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