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      2008/09  e-brief - JUNE 2008
                                                                                      e-brief - JUNE 2008
  Dear valued partner,

  BDO De Chazal Du Mée presents this year’s Budget Brief, which sets forth the main policies, as well as the
  fiscal and monetary measures, contained in the Budget Speech delivered by Dr.The Honorable Rama Sithanen,
  Deputy Prime Minister and Minister of Finance and Economic Development, on 6th June 2008.The opportunity
  is also taken to highlight the main economic indicators and to set out the summarised budget figures.

  We wish to extend our sincere appreciation to Mr. Pierre Dinan who kindly accepted to comment on the
  budget proposals, as an independent consultant.

  The Budget proposals are subject to amendments during the parliamentary debates on their adoption. There
  may also be finer points requiring detailed comments when the proposals are incorporated in the Finance
  Act 2008.

  We trust that this Brief will be of assistance to you in assessing the likely impact of the budget measures on
  your business.

  A copy of this Brief is posted on our website at:

  M. Yacoob A. Ramtoola
  Chief Executive Officer

  Budget Night
  6th June 2008
                                                                                           e-brief - JUNE 2008
Billions Galore
   The bumper crop which the Minister of Finance has claimed for this year has enabled him to distribute some
   late harvest largesse. While the medium term macroeconomic projection shows a budget deficit of 3.2% of
   gross domestic product (GDP) for 2007/08, a detailed set of figures entitled “Statement of government
   operations” reveals a deficit of 3.8% of GDP for the same period. This is due to the ESE (Estimate of
   Supplementary Expenditure) of Rs.4.5million for 2007/08. This amount will be expended in 2008/09 but its
   charge is being backdated to 2007/08. This is in order to keep the budgeted deficit for 2008/09 at 3.3% of
   GDP, as per our commitments vis-à-vis the international financing institutions. In actual fact, this financial year
   2007/08 has turned out favourably for the Treasury, thanks to surpluses of tax revenue (Rs.3.8 billion), lower
   interest charges (Rs.1.3billion) and lower expenditure on capital projects (Rs.0.98billion). In the light of such
   figures, one understands better how the full PRB cost, equal to 2% of GDP, is being paid in 2008/09, without
   rocking the boat.

   Be that as it may, it is not yet the time to loosen the reins. In 2008/09, the budgeted expenditure is estimated
   at 25.2% of GDP, as against 24.9% this year. Fortunately, thanks to higher revenue (21.9% of GDP as against
   21.1% this year), the budget deficit is estimated to go down to 3.3%. Looking further ahead, revenue will, in
   2010, fall to only 20% of GDP, due no doubt to the expected cessation of grants from the development
   partners for budgetary support. The budget deficit, nicely projected at only 1.6% of GDP for the period
   July/December 2009, will shoot up again in 2010 to 3.1%.

   Such projections must keep us on our toes, the more so as the deficit on the current account of the balance
   of payments shows no sign of improvement: after falling from 5.6% of GDP in 2007/08 to 3.5% in 2008/09, it
   is projected to rise again, reaching 4.3% in 2010.


   The best way to prove such projection wrong is to pursue relentlessly the growth path. This is acknowledged
   throughout the budget speech, as the measures which are envisaged are, on the whole, development friendly.
   It is gratifying to note that, pending the identification of a brand for Mauritius, the Minister of Finance is
   proposing his own, thanks to his AMIGO plan to make Mauritius into a place which is “attractive, modern,
                                                                                             e-brief - JUNE 2008
Billions Galore

   inclusive, green and open”. In effect, there is a welcome emphasis on the development of infrastructure, such
   as the roads, the port, the airport, water and waste water and on the acknowledgment that financing should
   be through public and private partnership. It is hoped that such projects will not be unduly delayed, as has
   too often happened in the past.

   The widening of the circle of opportunities has been mentioned a few times during the budget speech. While
   this is not a new theme, it has now been made explicit that the eradication of absolute poverty is being
   specifically targeted. This is welcome news for the 229 pockets of absolute poverty in the downtrodden
   suburbs , in some isolated rural villages and in Rodrigues. The emphasis on education for children and on life
   skills for their parents should go some way towards rooting out the causes of poverty. Success in this endeavour
   will, however, depend on the availability of trained social workers and of effective NGO’s which are
   adequately financed.

   The stage is set, the development and growth process must be pursued, while due care is taken for those
   who have not had their fair share so far. In that context, it is of interest to observe that this budget is about
   to entrust quite a lot of financing activity to a number of funds, such as the MID (Maurice Ile Durable Fund)
   - Rs.1.3billion; the Human Resource Development and Knowledge and Arts Fund - Rs.1billion, the Manufacturing
   Adjustment and SME Development Fund – Rs.500million and the Social Housing Fund - Rs.500million.
   In addition, the SME Partnership Fund, which relies on private sector support, will be revisited. It goes without
   saying that such funds will need to operate within the best practices of efficiency, transparency and accountability.
   This will be in line with what the Ministries have had to commit themselves to achieve through the adoption
   of Programme Based Budgeting, where expenditures are incurred in view of achieving outcomes and delivering
   projected outputs.

   Pierre DINAN
                                                                                     e-brief - JUNE 2008

  1.     Growth rate increases to 6.2% from 5.5%
  2.     GDP Per Capita increases to US$7,000 from US$5,500
  3.     Unemployment reduces to 8% with prospects for the creation of 60,000 jobs
  4.     Foreign Direct Investment to reach Rs.15bn
  5.     Inflation reduces to 8.8% from 10.7%
  6.     Imports cover 36 weeks from 33 weeks
  7.     Savings rate 20% of GDP
  8.     Budget Deficit reduces from 3.8% to 3.3% of GDP
  9.     Expenditure to increase from Rs.55.1bn to Rs.63.5bn
  10.    Revenue to increase from Rs.52.2bn to Rs.61.6bn

        REVENUE                                 2007 / 08 (Rs / bn)          2008 / 09 (Rs / bn)
        Tax                                          46.4                            50.7

        Grant                                         0.7                             4.0

        Other                                         5.1                             6.9

                                                     52.2                            61.6
                                                         e-brief - JUNE 2008

                                               Rs / bn
          Airport                                1.0

          Maurice Ile Durable                    1.0

          Food Security                          1.0

          Education & Knowledge                  1.0

          Poverty Alleviation                    1.0

          Low Cost Housing                       0.5

          DBM Waiver of penal rates and          0.5
          write off of small loan in arrears

          Industry to boost manufacturing        0.5
          and SME
                                                                                e-brief - JUNE 2008
  •   Public Private Partnership PPP:
      - Amendment to PPP Act 2004: To clarify unsolicited proposal
      - Wind energy project at Bigara: 25 - 40 MW, Rs.1 bn
      - Harbour Bridge: Construction July 2009
      - Ring Road: Construction July 2009
  •   Bus Modernisation Programme Rs.4 bn
      - 25 km Bus Way Corridor Curepipe Port Louis
      - 12 km Bus Only Lane along M1
  •   Rs.1 bn equity in Airports of Mauritius to support airport expansion
  •   Government guaranteed student loan up to Rs.150,000 per year to allow commercial banks to make
      loans to all students with an offer from a TEC recognized tertiary institution in Mauritius
  •   With regards to procurement,Government will give preference of 15% on price for small domestic
      enterprises with less than Rs.50 million turnover and a 10% percent preference for small domestic
      building contractors with less than Rs.50 million turnover
  •   Government is setting up a scheme with the participation of commercial banks for SMEs with less
      than Rs. 50 m turnover to qualify for a loan with limited equity
  •   Portability of Pension as from 2 years of full time employment
  •   Amendment to Banking Act: Retention period of cheque and documents from 30 years to 7 years. Banks
      to send statement of accounts to both borrowers and guarantors on all loans.
                                                                                   e-brief - JUNE 2008

  •   Bank to transact business on more flexible terms – outside of normal hours of business as well as on
      public holidays
  •   Financial leasing activities of commercial banks to be regulated by Bank of Mauritius only.
  •   Islamic Banking: Regulatory framework for leasing companies to market products which are Sharia
      compliant and amendment to legislation to make normal banking and Islamic banking tax neutral
  •   Commercial disputes to be settled within 7 months. Property registration to take 15 working days.
  •   Investors with turnover exceeding Rs.15 m for three consecutive years may apply for permanent
      residence regardless of when business started.
                                                                                    e-brief - JUNE 2008

  •   PRB - 100% Payable this year
  •   Pension - 9% increase
  •   Government issuing inflation indexed savings instrument with maturity of 3, 4 and 5 years
  •   Loan guarantee scheme to be operated by commercial banks to provide a revolving line of credit of
      Rs. 100 m for the purchase of farm vehicles and equipment
  •   Sugar deal: Prime Minister - MSPA:
      - Small planters and employees will join shareholding of all new ventures under the sugar sector reform
       plan with a 35% share
      - With regards to 2,000 arpents, Government is allocating 1,000 arpents for food crop production
      - Government will seek large tracts of 50 to 100 arpents to be leased to food production companies
       consisting of regrouped small and medium planters
  •   Re-introduction of Summertime: Clock moves forward 1st November 2008 to 31st March 2009
                                                                              e-brief - JUNE 2008

  Income Tax

  Income Exemption Threshold

                                         ACTUAL PROPOSED   TAX SAVINGS (Rs)   NO TAX ON MONTHLY
                                               (Rs)                           EMOLUMENTS OF (Rs)

   Resident taxpayer with no dependent         215,000             3,750               18,462


   Resident taxpayer with 1 dependent          325,000             3,750               26,923


   Resident taxpayer with 2 dependents         385,000             3,750               31,538


   Resident taxpayer with 3 dependents         425,000             3,750              34,615

   or more                                    450,000
                                                                                     e-brief - JUNE 2008

                                         ACTUAL PROPOSED        TAX SAVINGS (Rs)    NO TAX ON MONTHLY
                                               (Rs)                                 EMOLUMENTS OF (Rs)

   Resident retired taxpayer no longer           215,000                10,500                  21,923

   working with no dependent                    285,000

   Resident retired taxpayer no longer           325,000                10,500                  30,385

   working with 1 dependent                     395,000

  Banking activities

  •    Income from bank carrying out either normal banking or Islamic banking activities will have the same
       tax treatment.

  VAT removed on the following:

  •    Pharmaceutical products

  •    Potassium nitrate, mono potassium phosphate and magnesium sulphate used for hydroponics culture.
                                                                                    e-brief - JUNE 2008


  •   The purchaser of an IRS residence will pay duty of US$ 70,000 or its equivalent in Euro or GB Pounds
      Sterling or 5% on the value of the property, whichever is the higher.

  •   New legislation to be introduced to prevent double payment of duty by property leasing companies.

  No duty will be payable on:

  •   Purchase of agricultural land by metayers from sugar companies.

  •   New metayer lease contracts


  •   Land Transfer Tax will be payable on transfer of shares in companies holding immovable property.

  •   New rates for transactions where value of land transferred exceeds Rs.50 million=
                                                                                      e-brief - JUNE 2008

                                                                    CURRENT                 PROPOSED

   Land held for more than 5 years                                            5                     10%

   Land held for up to 5 years                                             10%                      15%

  •    Land Transfer Tax will not be payable by sugar companies on sale of agricultural land to metayers

  •    New legislation to be introduced to prevent double payment of tax by property leasing companies.


  •    Hybrid vehicles will be subject to 50% of the current registration duty rates as from 1 July 2008.
                                                                                    e-brief - JUNE 2008

                                                                           Increase as from 1 July 2008 by

   Taxis                                                                                Nil

   Cars below 1250 cc                                                                   Nil

   Vehicles between 1250 cc and 1850 cc                                               Rs.500

   Vehicles between 1850 cc and 2250 cc                                              Rs.2,500

   Vehicles above 2250 cc                                                            Rs.5,000

  •    Owners of hybrid vehicles will pay 50% of the prevailing amount of road tax as from 1 July 2008.
                                                                                         e-brief - JUNE 2008


  •      Several items will be subject to excise duty rather than customs duty at the same rate.

  •      Cigarettes will be subject to a single rate of excise duty of Rs.2,200 per thousand.

  •      There will be technical adjustment to the duty on alcoholic drinks with marginal change in prices.

  •      As from 1 July 2008, excise duty will be levied on both locally manufactured and imported products.

  •      Hybrid vehicles will be subject to 50% of the current excise duty rates as from 1 July 2008.

  Tariff is removed on the following:

      Solar water heaters and parts      Wide range of foodstuffs            Hair dyes
      Blankets                           Laminated flooring of wood          Photo voltaic cells
      Farming equipment and parts        Renewable energy related            Ceramic tiles, carpets and paints
      Transmission belts and safety      Tyres with energy saving and        Electrical fittings
      air bags                           spare parts emission
                                         reduction types
                                                                                       e-brief - JUNE 2008

  Tariff is removed on double space cabin vehicles without rear bed-caisson and single space cabin vehicles
  when purchased by the following:

   Small sugar cane planters            Vegetable, flower and fruit growers   Fishermen’s cooperatives

   Poultry farmers                      Pig and cattle breeders

   SMEs registered with SEHDA with turnover of at least Rs.3m and engaged for at least 2 years in

   Furniture making                     Light engineering                     Footwear manufacturing

  Tariff is reduced on the following:

   Primary cells and batteries          Clothing and footwear                 School and office supplies

   Doors, windows and blinds            Toiletry and personal care products Motor vehicle spare parts
                                                                     e-brief - JUNE 2008


  •    The taxation of casinos and gaming houses will be reviewed.


  A levy of 15 cents will be payable on each

  •    litre of petroleum products

  •    kilo of LPG

  •    kilo of coal.
                                                                                     e-brief - JUNE 2008

  Please do not hesitate to contact any of the Partners listed below for any assistance you may require.

  • Yacoob RAMTOOLA                                      202 3112     

  • Georges CHUNG                                        202 3121     

  • Afsar EBRAHIM                                        202 9762     

  • Kaneya HAWABHAY                                      202 3002     

  • Jacques POUGNET                                      202 3003     

  • Azize RAJABALEE                                      202 9517     

  • Abdullah RAMTOOLA                                    202 9521     

  • Anthony RAULT                                        202 3094     

  • Gilbert SEEYAVE                                      202 9548     

  • Marie Louise TENG                                    202 3042     
P.O Box 799, 10, Frère Félix de Valois Street, Port Louis,Mauritius