We should make sure all 50-odd African countries are in attendance along with two university buddies. Then bring up the table on the screen while a fresh round of gato-pima is served. And explain that by the end of 2019 (that’s before the pandemic started affecting us) Mauritius had about Rs1,800 billion of GDP missing (our private sector accounting for about 80% or Rs1,440 billion of this shortfall) compared to what the 8% growth of the 15% flat tax was supposed to generate. If we assume a very conservative 20% GDP cut for government revenue and the monies are left in a drawer then there is more than Rs350bn of government revenue missing. This could have been placed in a sovereign wealth fund (SWF) that would have easily got us over the bump in the road that COVID-19 is creating and allowed our frontliners to work in less stressful conditions.
But it would have made more sense to increase the share of government revenue to the OECD average of 35% of GDP as our population has been aging since 2005, to improve our welfare state and to bring retirement age to 55 years so we mitigate our serious brain-drain problem. This
would have boosted the SWF to Rs623bn. Even if we had grown at 6.5% per year over these fourteen years there would have been between 195bn to 342bn rupees available to prepare us for any tough situation. Why is 5% in the table? It’s our average growth for the fourteen years – a period of progressive and sustainable taxation – before Sithanen started screwing up the economy and Mauritius big time. So even in this worst case scenario there would have been Rs58bn-Rs101bn of extra government revenue available for bad years like 2020 and 2021. Without compromising the independence of the BoM, destroying our savings culture, sending our rupee into a tailspin, creating a horrific amount of poverty and inequality and rushing our economy over a steep cliff.
Last year Minister Padayachy increased top personal tax rates to 40% marking a healthy and long overdue break from the ruinous tax policies. But he did add a weird cap afterwards. For the 2021/22 budget he has no choice but to increase top corporate tax rates to 30%, remove that funny cap and do at least four things.* We definitely don’t want to have a massive social crisis.
It’s quite possible borders won’t open before a while. So our disastrous experience with Shaitanomics might have to be shared with our African brothers and sisters via Zoom for now. Maybe the EDB can take care of this after it removes its foot from its mouth.
* Jagatsingh, S., Budget 2020/21, Republic of Mauritius, Analyst Report, August 2020, 28 pages.