Mauritius: Fiscal measures and Expansion of Financial Services Sector

Ensuring fiscal soundness and sustainability, macroeconomic stability and intergenerational fairness, is one of the main features of the 2011 budget aimed at driving Mauritius on a modern development path. To fulfill the mission of “responsible fiscal stewardship” considered as the bedrock of Government's actions that will target a greater segment of taxpayers, measures will be taken to abolish the National Residential Property Tax and the Tax on Interest with effect as from 1^st January 2010.

Among the key fiscal measures to keep debt at a manageable proportion of GDP:

• Introduction of a solidarity income tax for individuals with total income, including exempt income, of over Rs 2m and these earners will be charged 10% on their exempt income;
• Introduction of tax breaks for taxpayers investing in their first home and for those investing in their children's education, provided that they are not subject to the solidarity income tax or currently benefiting from the new housing schemes;
• Increase in the passenger fee levied on tourists;
• Increase in the special levy imposed on banks to 3.4% of profits and 1% of turnover to maintain the solidarity efforts provided by profitable banks in Mauritius which will apply for the next two financial years;
• Special solidarity levy imposed on the providers of fixed and mobile telephony services to be maintained for the next two financial years;
• In a bid to resolve anomalies and deviations from international best practice in the country's value-added tax (VAT) legislation, a provision is included in the 2011 budget to move selected items, including wheat flour and bran, from the list of zero-rated supplies to exempt supplies from March 1.Producers of such goods will be able to recover input tax when they export;
• Reduction of 10% as regards gains from the sale of land and immovable property which will apply to individuals. Individuals will also benefit from an exemption on the first Rs 2 million of gains. The tax will not apply to land or to immovable properties received by way of inheritance or transferred by parents to their heirs; and
• Increase in the amount of income tax exemption for lump sums provided on retirement and for severance from Rs 1 million to Rs 1.5 million.

Measures to facilitate and encourage financial institutions to deliver services efficiently and to help the financial services sector maintain its dynamism are also to be implemented. Among these:

• Amendments will be brought to the law to expand the scope for corporations holding Category 1 Global Business License to extend their operations to the domestic economy;
• The role of the Monetary Policy Committee will be reviewed ;
• A Sovereign Wealth Fund of USD 500 million will be set up and the Treasury Foreign Currency Management Fund will be closed down;
• The maximum period for which the Bank of Mauritius (BoM) can grant advances will be lengthened from 3 months to 6 months; and
• The BoM will be given wider powers to develop the forex and derivatives market; and the legal framework for the banking sector will be brought in line with the insolvency legislation.