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Budget 2013 Our analysis. 2 “ We saw the threats and we overcame them. We saw the opportunities and we seized them….. ”

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Presentation on theme: "Budget 2013 Our analysis. 2 “ We saw the threats and we overcame them. We saw the opportunities and we seized them….. ”"— Presentation transcript:

1 !@# Budget 2013 Our analysis

2 2 !@# “ We saw the threats and we overcame them. We saw the opportunities and we seized them….. ”

3 3 !@# Table of contents Page number Economic indicators4 Government revenue and expenditure7 Foreign Direct Investment10 Infrastructure13 Imports and exports15 Education and Health19 The Traditional pillars22 Emerging sectors27 Fiscal measures30

4 4 !@# Economic indicators “In spite of this turmoil, Mauritius not only achieved positive growth but we improved our economic fundamentals….”

5 5 !@# Key economic indicators ► Inflation – Inflation has cooled down to 4.1% – It is projected to be 5% in 2015 ► Gross Domestic Product – The Mauritian economy will grow by 3.4% this year – Despite the bleak global environment, GDP is forecasted to grow by 4% in real terms in 2013 ► Unemployment rate –The unemployment rate stagnated around 8%

6 6 !@# Key economic indicators ► Equity market indices –Equity market indices paint a somewhat more optimistic picture –All of the three key indices have shown a steady rise –This suggests improved investor confidence, which might be the result of growing optimism over the country’s growth ► Budget deficit –The budget deficit is estimated to be around 2.5% of GDP by the end of the calendar year 2012 –It is expected to be 2.2% for 2013

7 7 !@# Government revenue and expenditure “Tax revenues collected by the MRA alone have increased by 10%....”

8 8 !@# Government revenue ► Revenue – There has been a 9.2% increase in overall tax revenue in 2012 – Total revenue will go up by 12.5% to Rs 83.3 billion, of which Rs 71.1 billion from taxes in 2013 – The improvement is attributed to: – Efficiency in administration of taxes – Results of tax amnesty schemes – Revenue projections show increase in taxes over the next four years to Rs 82 billion in 2015

9 9 !@# Government expenditure ► Expenditure – Improving control on public expenditures – Setting up of a Public Sector Task Force and Local Authority Governance Unit – Expenditure will increase to Rs 91.8 billion of which Rs 11.7 billion is for direct capital expenditure – Compensation of employees represent 23% of government expenditure in 2011 – Total actual expenditure in 2011 amounts to Rs 87 billion including capital repayments – This is estimated to reach Rs104 billion in 2013

10 10 !@# Foreign direct investment “Our policies on opening the economy and our relentless work to improve the investment climate...”

11 11 !@# Foreign direct investment ► Foreign direct investment (“FDI”) amounted to Rs70 billion for the past 7 years, as a result of favourable investment climate ► Intensification of investment promotion targeting China and the rest of Asia ► Upgrading of sovereign debt from Baa2 to Baa1 by Moody ‘s confirms positive business climate ► FDI flows from Africa and Asia have already exceeded those from Europe ► Measures to attract FDI: – Revisit Business Facilitation Act; – Assistance to implement large projects; – Smoothening of procedures to obtain occupation and residence permits to investors and professionals; – Permit holders allowed to acquire apartments; – Signature of bilateral investment treaty with USA; and – Extend our Double Taxation Agreement networks with African countries.

12 12 !@# Foreign direct investment ► Mauritius has already well positioned itself to encourage FDI through various business facility measures and reduction in cost of doing business ► These measures would position Mauritius as the preferred African Hub for investment

13 13 !@# Infrastructure “..this Budget will build upon the strong foundations that the Government has laid ….”

14 14 !@# Infrastructure ► Public Sector Investment Programme – Rs28.6 billion, an increase of 39% over last year’s budget, allocated for the construction and improvement of infrastructure principally in the following areas: o water and electricity resources, o waste water management, o road improvement, o port and airport infrastructure o communication facilities among others. - Opportunity to implement the Government programme announced in last April – major public infrastructure to be financed through FDI inflows to the extent of 10% - Massive investment in roads and other infrastructure projects would contain the unemployment rate

15 15 !@# Imports and exports “Growth is visible across the country…”

16 16 !@# Imports and exports ► Statistics - Strong reliance on traditional markets - Total exports for the six months ended 30 June 2012 amounted to Rs 32,220 million - Total imports for the corresponding period amounted to Rs 77,302 million ► Budgetary measures to boost exports - Air access to emerging markets: China and Russia - Extension of Double Taxation Agreements (“DTAs”) - Revamp of VAT refund scheme - Abolishing of AGOA levy - Introduction of Pre-Clinical Research Bill - Extension of Student Visas and part time work schemes Central Statistics Office

17 17 !@# Imports and exports Central Statistics Office ► Import and export segmentation

18 18 !@# Imports and exports ► Government approach - Improve access to economic and business information - Market consolidation and diversification - Technology upgrade - Productivity enhancement - Compliance with international standards ► Targeted sectors - Medical and pharmaceutical - High precision metal and plastic products - Technical textiles Forecast % change in volume of imports and exports International Monetary Fund, World Economic Outlook Database, October 2012

19 19 !@# Education and health “the performance of our economy this year tells the story of a population that is resourceful…”

20 20 !@# Education – Increase in education budget by 12% to Rs 12.6 bn – Country wide technology access in schools – Access to free online IT training programme Massachusetts Institute of Technology – Introduction of government-backed loan schemes at Repo rate + 3% for university fees for eligible students – Bridging the gap between market requirements and academic qualifications – Commitment to finding employment for school leavers through the Youth Employment Programme – Industry placements further encouraged – This may help to reduce the high unemployment rate among youth

21 21 !@# Health – Rs 8.7 billion allocated to health services – Recruitment of 25 specialists, 75 general practitioners and nurses – Continuous Professional Development introduced for medical practitioners and dentists – Pre-registration exams for medical graduates to ensure competence – Introduction of new shift system – Tax introduced on sugar content of soft drinks – Increase in excise duties on alcohol and cigarettes

22 22 !@# The traditional pillars “Supporting growth and creating employment…”

23 23 !@# Financial services sector ► Encouraging growth rate of 12.4% in the global business sector ► Continuation of measures aimed at diversification of the global business market ► Creation of the Limited Partnership Bill ► Creating a favourable regime for non-treaty funds ► Expansion of DTA and Investment Promotion Agreements ► Enhanced substance requirements for Tax Residence Certificate ► Tax Information Exchange Agreement to be signed with India ► Cap on bank charges in respect of banking sector ► Licence fees for management companies would be based on turnover ► Introduction of a deposit insurance legislation

24 24 !@# Tourism ► Double digit increases in tourist arrivals from Asia, Africa and Australia ► Arrivals from Europe expected to stabilise in 2013 ► China and Russia targeted as new markets ► Entertainment facilities promoted in non-residential areas ► Mauritius promoted as a shopping destination ► Medical tourism on the increase ► Facility to pay the Environment Protection Fee extended to two years for hotels and guest houses in trouble waters ► Medical tourism on the increase ► 50% reduction lease rental for hotels in reconstruction or renovation

25 25 !@# Manufacturing sector ► Manufacturing sector is the largest sector in the Mauritian economy contributing to more than 15% of the country’s GDP ► Enablers in the budget include access to finance and reduced borrowing costs ► Higher tax deductions on acquisition of plant and equipment for manufacturing companies ► Expanding the USA and the African market share ► AGOA levy abolished to boost exports ► Increased marketing budget for products “Made in Mauritius “ at overseas level ► Bank guarantee for expatriates working in export- enterprise abolished ► Additional certainty for business as changes in import duty will be communicated at least 6 months prior to the changes ► Debt of up to Rs 20,000 undertaken with the Development Bank of Mauritius which has remained unpaid for at least 3 years will be fully waived ► Refund in respect of overseas marketing to Small and Medium Enterprises is increased to Rs 200,000

26 26 !@# Agriculture ► Land conversion to be monitored ► Subsidy on locally produced compost to discourage use of chemical fertilizers ► VAT refunds on extended list of equipment ► Freight rebate scheme extended for fruit planters and exporters ► Efforts made to extend market access for refined sugar till 2020 instead of 2015 ► Growers of fruits and vegetables allowed to join the Field Operations Regrouping and Irrigation Project scheme with a view to reduce their cost of production ► Cost of pre-market tests and certifications would be borne by the state for qualifying planters

27 27 !@# Emerging sectors “Those countries that will succeed will be those that have risen to the challenges of a world in transition…”

28 28 !@# Emerging sectors ► Seafood – The seafood sector has witnessed negative growth in the year 2011 after fast expansion in 2010 – Additional small scale aquaculture projects being launched to harness the economic benefits – Continue lagoon replenishment program – Creation of off-shore wind farms in Rodrigues ► Information and Communications Technology – Better access and improved internet connection at subsidised fee – Internet and new technology in schools – Payment in various government departments can be made electronically – Extension of optic fibre connection to Rodrigues – Increase in the number of 4G spots

29 29 !@# Emerging sectors ► Cloud computing – Worldwide revenue from public IT cloud services exceeded $21.5 billion in 2010 and will reach $72.9 billion in 2015, representing a compound annual growth rate (CAGR) of 27.6% – China spent $286 million on cloud-computing infrastructure last year, and the amount will increase to more than $1 billion in 2016 according to International Data Corporation (“IDC”) – Cloud computing is expected to create 2 million jobs in India by 2015 according to IDC – Key aspects on introduction of cloud computing: Security and Privacy, Standards and risk management, cross border taxation, regulatory compliance, technological infrastructure and human resources training.

30 30 !@# Fiscal measures “create fiscal space for the ambitious..”

31 31 !@# Fiscal measures ► Personal tax – Annual tax deductions on contributions made to a medical or health insurance policy – Amount of deductions depends on the category of the individual and number of dependents – CPS threshold increased to Rs 4 million – Increase in the monetary value of benefits- in- kind in respect of the use of company cars, hotel and lodging costs – Interest received by an individual from debenture quoted on the stock exchange would be exempt from tax – Income Exemption Threshold for disabled person aligned to that of retired persons – Exemption in respect of severance allowance will cover negotiated compensation under the Employment Rights Act but will be limited to the Courts ruling; effective date is backdated to 1 February 2009 – Tax Amnesty scheme applicable as from January 2013 to September 2013

32 32 !@# Fiscal measures ► Corporate tax – New category of assets qualifying for annual allowances and higher annual allowances rates for manufacturing and eco-friendly equipment for 2 years – Increase in the value of asset to Rs 50,000 that qualifies for 100% annual allowance in the year of acquisition – Temporary suspension of the Alternative Minimum Tax for hotel and manufacturing companies – Income Tax exemption granted to global funds not requiring any benefit under the DTAs and set up as a corporate body – Advance Payment Threshold increased to Rs 4 million – Service fee payable for issue of Tax Residence certificate under a DTA. – Deduction of Tax at source mechanism extended to laboratory technicians – Tax Amnesty scheme applicable as from January 2013 to September 2013 – Rate of DTS on interest payment to non-residents increased to 15%.

33 33 !@# Fiscal measures ► Corporate tax – Special levy on banks maintained for the years of assessment 2013 and 2014 – Solidarity levy on telephony service providers extended to the year of assessment 2014 – Companies can carry forward any unremitted CSR contributions of up to 20% to the next year provided approval is obtained from the CSR committee – Basis of computing the income tax for companies engaged in the insurance sector will be reviewed after consultations with the relevant stakeholders – More clarity on taxation of foreign exchange gains – Tax holiday for small enterprise has been removed – Freeport status would be granted to companies wishing to carry out specific manufacturing activities for export to the African continent

34 34 !@# Fiscal measures ► Value Added Tax – Increase in the statutory VAT registration threshold to Rs 4 million – VAT refund scheme for the agro-industrial and fisheries sector extended for an additional year – List of capital expenditure qualifying for the refund is increased – VAT refund on fittings, furniture and equipment for shops and restaurants in city centres will be made within 7 days – Simplification of VAT refund for tourists at airport – Abolishment of VAT on cinema, concert and shows tickets

35 35 !@# Other fiscal measures ► Customs duty and tariff – Reduction of duty on certain goods in line with SADC trade protocol – Shops operating under the ‘Deferred Duty and Tax Scheme” will now be able to export goods to customers outside Mauritius under customs control ► Land transfer tax and registration duty – Registration duty exemption for first time buyers of residential property increased to Rs 1 million for the purchase of land and Rs 4 million for the acquisition of built up residential property – Registration duty is applicable on the value of the immoveable property transferred and no longer on the lower of the value of the immoveable property or the value of the shares of the company being transferred – Dilution in the control of companies holding property would attract registration duty – The tax base for registration duty and land transfer tax of immoveable property on plan would be the value of the immoveable property at the time of transfer

36 36 !@# Disclaimer

37 37 !@# Disclaimer ► The information in this pack is intended to provide only a general outline of the subject covered. It should not be regarded as comprehensive or sufficient for making decisions, nor should it be used in place of professional advice ► Accordingly, Ernst & Young accepts no responsibility for loss arising from any action taken or not taken by anyone using this pack ► Further, the information in this pack will have been supplemented by matters arising from any oral presentation by us, and should be considered in the light of this additional information ► If you require any further information or explanations, or specific advice, please contact us and we will be happy to discuss matters further


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