BDO:A subtle combination of response to the crisis…

he second budget of Hon Xavier Luc Duval states the sound economic fundamentals of the economy in the wake of the continued Global Crisis. The economy has grown by 3.4% in 2012 and is projected to grow by 4% in 2013. The Budget Deficit in 2012 is reported at 2.5% and will improve to 2.2% in 2013. The Debt to GDP continues its downward trend from 54.2% in 2012 to a forecasted 53.7% in 2013 and targeted to reach 50% in 2018.
Ten years after the launching of the Cybercity, Government has come up with a major thrust in the IT cluster. The reduction of internet cost, the rolling out of a mass online IT Training program, the replacement of fixed cables by wireless technology, the establishment of 4G technology across the country and the introduction of Emerging Leaders Award under chairmanship of a world renowned business guru, Robin Sharma, aim at spurring economic growth, e-government and computer literacy. E-Government will lead to a greater customer friendly approach, whilst the grant of computer tablets will enhance computer literacy.
The Minister has also established a clear strategy for Africa in the wake of global interest in the once forgotten continent.  The removal of visas, increased scholarships to African students, more DTAA and incentives in Freeport extended to all manufacturing sector exporting to Africa will go a long way towards making regional trade and regional integration a reality.  
The Financial Services continue their fast growth and to enhance substance, the Minister proposes a diversification of product offerings with measures to set up Regional Treasury Centres, regional Headquarters Administration, the creation of a regime for Non Treaty Based Funds and the introduction of a Limited Liability Partnership Bill.
The Minister has reinstated fiscal incentives where the Manufacturing Sector will benefit from 50% of accelerated depreciation on acquisition of plant, machinery and equipment. High street retail shops will also benefit from accelerated capital allowances to refurbish their shops to compete with shopping malls in addition to other fiscal measures and discounted financing under Lease Equipment Modernisation Scheme.
Export-oriented enterprises especially Textiles will see improved cash flow as funds tied up in providing bank guarantee will be released as this requirement of providing bank guarantee for expatriate workers is being abolished.
SMEs have been given a further boost from the Marshall Plan of 2012 with banks financing an additional Rs250m to SMEs with less than Rs10m turnover at the rate of 7.9% (Repo Rate + 3%). Government will guarantee 50% of banks losses under this scheme.
Incentives and measures relating to the real estate sector concerns foreigners, the productive sectors, first time buyers and administrative procedures. Those granted an Occupational Permit under category 1 ( Earning more than $3,000 monthly and investing more than $100,000) can acquire apartments in a ground + 2 complex, facility is extended to those non-citizens investing a minimum $500,000 in a qualifying business activity. Land Conversion Tax is also being abolished for construction of buildings for training, manufacturing activities, power stations for renewable energy and golf courses. Exemption is being provided for first time buyers, acquiring a residential unit of up to Rs4m and for land up to Rs1m resulting in savings of more than Rs135,000.  
The talent management is being addressed by the Youth Employment Programme and the Skills Working Group. The former is being revamped and enhanced while the latter will be a public-private initiative to provide tailor made and practical training to put the youth into the work stream.
The social measures have been enhanced as it is customary but the flagship measure remains the provision of one hot meal daily to 9,200 children in 30 ZEP schools.
The reinforcement of the Audit Department and the Public Accounts Committee and the concept of interim audit augur well for the control of public expenditure.
This budget has adopted a prudent approach with measures which have been tweaked to ensure that the small island economy continues to be resilient in the wake of continued global crisis and maintains sound economic fundamentals prevalent through tax buoyancy and containment of public spending. At the end of the day, any good accountant will tell you, it’s the results that count!
BDO & CO
Budget Night
Friday 9 November 2012