BDO & CO : « Rebooting the economy boldly »

The third passage of Hon P. Jugnauth as Finance Minister has resulted in him rebooting the economy with a new mindset in the wake of uncertainty and adversity that the country faces.  The Speech though well-articulated is well thought of in most respect. There have been some reversal of measures introduced in last year’s budget and clearly breaks from past ones.
Emphasis has been placed on the competitive advantage of Mauritius: A low and simple fiscal regime with reintroduction of the concept of tax holiday and improved investment tax credits, even companies operating in the financial services sector are benefitting from tax holidays. It has however hit hard with taxes on alcohol, sugar and tobacco. These deterrent taxes are not new but the extent of the hammering has been unprecedented.
The redefining of industrial strategy is welcome with the opening of gold business, pioneering the low sulphur bunker fuel in Indian Ocean and the return of Leasing Equipment Modernisation Scheme ensure diversification and allow for modernisation. The bold and welcoming measure is the Air Freight Rebate of 40% which brings Mauritius closer to its markets. This will enhance competitiveness of our exports and will give an impetus to our textiles and apparel sector.
The financial services sector is being reshaped post DTA-India with new commodity exchange for gold, diamond and precious metals. The sector benefits already from low tax regime which will now have certain licensees of FSC benefitting from tax holidays. This is very bold indeed. However, in terms of attracting and opening up to foreigners it is open to debate whether the minimum investment of USD 25m to be eligible for tax holiday is not too high to have a meaningful impact.
The Institutional Public Sector reforms have started as various institutions are set for merger. This is another bold start to eliminate inefficiencies, duplication and wastage.
From fiscal responsibility, the budget deficit is being reduced to 3.3% from 3.5% and public sector debt down to 62.8% from 65%. There is sufficient manoeuvre and fiscal space that is allowing the Government to make an early repayment of USD120m to reduce its external debt.  The GDP growth rate is expected to reach 4.1% from 3.4%. This will be a major achievement if we do get to that level, a target which sadly has been missed before.
The grant of Rs12.7 billion from Indian Government has been outlined with regard to its allocation and it is pleasing to note it is going towards development priorities including the Metro express project which once completed will have a major impact on efficiency.
The budget includes various social measures that will alleviate poverty and those who are economically vulnerable. However, the CSR reforms have gone from one extreme where guidelines were removed to the creation of a new institution that effectively means an implied tax and where employee participation in CSR activities is being removed.
This budget marks a new style in the way it has been presented, its measures in certain respects are bold and are most welcome but its execution will be critical. The jury is out and if the GDP growth target of breaking the 4% psychological barrier is achieved, then we shall look back and laud it as the beginning of the new era!