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Mauritius Budget Highlights 2020/21

Mauritius Budget Highlights 2020/21

The 2020-2021 Budget was delivered on Thursday 4 June 2020.

The 2020-2021 Budget was delivered on Thursday 4 June 2020.

KPMG View

An array of social measures for economic revival

The Minister of Finance, Economic Planning and Development, presented on 4 June 2020 the 2020-2021 budget speech entitled “Our new normal: the economy of life”.

The Government has embarked into the post COVID-19 era with measures presented under a “Plan de Relance de L’Investissement et de L’Economie”, “Major Structural Reforms” and “Securing Sustainable and Inclusive Development”.

As the country navigates its way out of the COVID-19 pandemic with a projected contraction of 11% this year, we also face an ageing population and a high gross public sector debt ratio of 83.4% (net 72.7%).

The budget sets the tone with a high social agenda. There is a continuance of projects and ongoing sector avenues such as the blue economy, consolidation of financial sectors, stimulating the data economy, building of a pharmaceutical industry and promotion of regional partnerships.

The tourism industry received a number of incentives such as the possibility to convert hotels into service apartments which can be sold individually, a two year no-licence fee period for Tourism and Beach Authority operators, a waiver of rental of State land for one year, and the increase in the rebate scheme for renovation and restructuring to 100% until 2022.

Reducing concentration and promoting local manufacturing

Local manufacturers will benefit with supermarkets dedicating at least 10% of shelf space to local produce and government bodies being required to source at least 30% of their supplies as locally produced. In the agricultural sector, a centralized platform will accelerate self-sufficiency.

Other measures include land acquisition by Landscope for increased agricultural use as well as additional subsidies to small planters for investment.

Continuing the infrastructure building story amidst the COVID-19 crisis

The significant allocation of more than MUR100 Billion to infrastructure came as a surprise at a time when the bulk of the funding headroom available to the “Grand Argentier” would have perfectly served the wishes of the pro-welfare and socially generous audience to see funds deployed to preserve the uncertain livelihoods and basic needs of the COVID-19 economic victims. One can only deduce that the state has chosen not to nationalize the private sector’s decision to sustain employment or has decided that this social decision has to be owned by private sector operators.

Nevertheless, provisions have been made for 34 projects worth MUR62 Billion of which MUR12 Billion for social housing units. The remaining projects budgeted for are the dam at Riviere Des Anguilles, New Urban bus terminals, new roads and bridges as well as a fishing port and a cruise building.

Export, financial and other services

To boost our competitiveness for exports, port dues and handling charges will be reduced by 50% and export companies will be exempted from land transfer tax on the acquisition of immovable property. Given the ranking of Mauritius as a high risk jurisdiction by the EU, it is without surprise that a budget has been earmarked for the implementation of the FATF action plan.

At last we are seeing attention being given to the 2017 Blueprint on financial services as part of which the introduction of new enhanced financial products such as digital currency, Insurance Wrapper, Variable Capital Companies, Sukuk, and Green and Blue Bonds are on the agenda. A Venture Capital Market is also being proposed for start-ups and SMEs.

The announced Mauritius Investment Corporation (MIC) to be promoted by the Bank of Mauritius will be positioned to invest in the Pharmaceutical and Blue Economy as new strategic sectors. In the Blue Economy sector, inland aquaculture businesses will further benefit from eight-year tax holidays and duty exemptions. With respect to Africa, it is announced that the MIC will allocate MUR10 Billion of its portfolio for Africa investments in G2G projects.

Structural reforms

The National Pension Fund contribution is being replaced by a progressive formula: “Contribution Sociale Generalisée (CSG)” whereby employees earning up to MUR50,000 will be subject to 1.5% as employee contribution and 3% as employer contribution. For employees earning more than MUR50,000 employee contribution will be 3% and employer contribution 6%. In order to include informal workers as beneficiaries of the CSG, Service Employment Cheques will be introduced as from September 2020.

Opening to the World by attracting talents and expertise

In order to encourage foreign talents to support our local growth, several incentives have been announced, namely simplifying the existing permits and related procedures, extending their validities and providing more flexibility in terms of investments.

The spouse of an Occupation Permit holder and non-citizens under various real estate schemes will now be allowed to work or invest locally.

Developing a sustainable future

The Government will continue to invest in landslide stabilisation works, protection of beaches, lagoons and coral reefs, and cleaning of drains, roads, rivers and public sites for a total budget of MUR736 Million.

In terms of health care a number of measures will be implemented within a total budget of MUR12.4 Billion.

The education wallet is budgeted at MUR15 Billion and includes investments in wireless facilities for 155 secondary schools in Mauritius and Rodrigues as well as a national e-learning platform to connect educators of secondary schools.

DBM will also provide financing facilities to households for acquisition of IT equipment for educational purpose.

Taxing the high income earners

High earning Mauritian residents will be subject to higher tax charges due to an increase in the solidarity levy on income in excess of MUR3 Million from 5% to 25%.

Conclusion

This budget comes as a stark reminder of the hard reality of having a Government with limited means driven by a legacy of high public debt. Private sector operators whose businesses have been impacted by COVID-19 would not have received the much awaited relief, at least not until MIC funds are deployed.

 

Disclaimer

The above information has been extracted from the budget speech delivered by Dr the Honourable Renganaden Padayachy, Minister of Finance, Economic Planning and Development, to the National Assembly, on 4 June 2020.

The Budget proposals may be amended significantly before enactment. The content of this summary is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. In such cases specialist advice should be taken.

© 2020 KPMG, a Mauritian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.


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