I have not written for ages – maybe no topic / issue / story really made me feel I should share my thoughts, for what they are worth.
For year 2020, I had personally planned for a car and pay off part of my personal / home loan. Well, those are the plans of a middle-class person like thousands of others in Mauritius. But, when the pandemic hit, I delayed all my plans and preferred investing in savings plans thinking that one can only help oneself.
In the wake of this plague, the world is faced with numerous challenges. Governments have been called upon to care as much as possible for the deprived persons in precarious situations. Mauritius has held steadfast through the fight against the virus thanks to strict measures of the government at opportune time and many sacrifices of its nation.
Once the lockdown was lifted, the country had a lot of expectations from the National Budget which was the way for government to lay down a plan to boost the economy while saving as many jobs as possible and providing job security in other cases.
I am by no means an economist nor pretending to be an expert. But I have thought through one aspect of the budget which directly impacts me and thousands of people like me. In this time of great uncertainty, the timing of the introduction of the Contribution sociale Généralisée (CSG) replacing the “unsustainable” National Pensions Fund (NPF) system is questionable. The communication strategy in the budget is clear – a fairer contribution and distribution of pensions. Here the highlight is “fairer contribution”.
But is it actually fair? And, most importantly, is it a contribution?
It is important for me to put these questions into my perspective. I earn more than Rs 50,000 monthly and my “contribution” to the CSG will be 3% from September 2020 and my employer’s “contribution” on my behalf will be 6%. A total cost to company (CTC) of 9% – actually, the opportunity cost being what I could have received in hand as part of my package. But now this is contributed to the CSG to “enable me to benefit from the fairer national pension”.
But, in fairness, by my retirement age, I would have contributed a lot more than persons earning less than me or persons not registered for CSG. Yet, I would earn the same pension at my retirement as everyone else. I am happy to extend my modest help to the social welfare system but earning more than Rs 50,000 is actually punitive for me as I contribute more to earn less at retirement.
Without this social contract, I could have simply asked my employer to put the 9% CSG (or less after making an actual social contribution) into a fixed deposit earning an interest (low side) of 4% per annum. My point is that the CSG which could be accumulated by me by my retirement age could be around Rs. 2.5M – 3M. Simply the interest on such an amount could have become my retirement plan. But, the truth is that I can only earn the national pension.
All in all, answering my two questions:
1.Is it fair?
See above – is it immoral to earn more than Rs 50,000? I have worked late hours on numerous days in an effort to raise my standard of living little by little. My battle is being wrongly tagged as immoral. I am more than willing to participate in welfare state but I believe it should be fair to me. Nothing was handed to me on a golden platter.
2.Is it a contribution?
This is not a social contribution. It is a disguised tax as neither the principal nor probable interest which could have been earnt are being paid back to me.
My painful conclusion is that today I am being taxed at 24% (not accounting for Portable Retirement Gratuity Fund which could also have been in my hands) instead of 15%. The harder part is that, people in the same band as me, would probably find their employers freezing their pay package for at least some time to equalize the net effect of CSG on their cash flow. Ultimately, any corporate will look at CTC.
Some can call me a whiner, but, is it wrong to simply ask not to misrepresent facts? We should name an elephant an elephant!
Yesterday, in a friendly discussion, I was struck by a realisation – my opinion counts only in quarters of people personally known to me – which could actually be true in the society that we live in.
Yet, I want to say I am a proud citizen of my beloved Mauritius. I still have a voice. And today I voice out my concern that I am taxed at 24%! If ever anyone feels the same way, then do share.