In line with the invitations by the Ministry of Finance for 2021-22 pre-budget consultation proposals, Temple administration facilitation and Tax Services (TACTS), upon consultation with various other stakeholders has taken a holistic stance on fiscal matters, including, weighing in on taxation, enterprise protection, and environment, amongst other areas of the economy, and made its propositions as under.
This exercise has been achieved on the premise that the bulk of any sovereign budget is anchored around public revenues and proposed govt expenses with a fair sprinkling of incentives and stimuli
Common Man Relief and Equitable Income Distribution
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- Increase the Personal Income Tax (PIT) thresholds by 12.5% given the depreciation of MUR to dominant currencies. Increasing tax liability thresholds will keep additional income in the hands of the earner, which will trigger both increased consumption and savings.
- Reduction of VAT to 12.5%, and increase of PIT and Corporate Income Tax (CIT) to 17.5%. Reading from the annexes of the current Budget, the revenue from VAT is two-times more than from PIT/CIT, so there would be a negative gap. However, a reduction in VAT will provide purchase power increment, thereby increasing consumption, and mitigating that negative gap.
- Employee Stock and/or Incentive Options: Double deduction of Tax for employer
- Tax exemption for employee: Given the uncertain times in general, employees would be compensated (in lieu of salary raises in line with government govt guidelines) by way of stock/incentive. The quantum awarded should benefit from double deduction of CIT, providing additional relief to employers. Concurrently, the employee should be exempted from suffering tax on the stock value/incentive received for the fiscal year.
- Tax relief on Health Insurance Thresholds to be doubled: this would be in line with the concerns around the continued pandemic, release some pressure from burdened public health service, and increase insurance business (which will reduce insurance premiums)
- Deductions for home office usage:
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- As telecommuting and home offices become increasingly common, employees who work from home should be given some personal tax relief as their residence and resources are partially used for employment purposes. The Government could consider introducing home office relief, which can be given as a percentage of expenses incurred or at a per-day rate.
- We should also flesh out the idea that there is a WFH monthly digital allowance that each company pays to its employees for use of personal laptops, Wi-Fi, electricity, and even home space (all of which when declared by a company can be expensed in the company’s financials). This amount is the offset against tax payable to the Government, this way there is no real additional expense to the employer, the govt also does not totally lose out as it makes money from electricity, Wi-Fi usage, etc.
- VAT waiver for purchase of home office e-equipment such as computers, printer, and such.
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Enterprise Boosting
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- Abolishing the Dividend Levy completely: The Dividend levy, an alternative tax form, is in breach of “Base Erosion and Profit Shifting (BEPS)” primary consideration of Tax Harmful practices, especially on the ringfencing of taxation. You can’t have GBCs exempt from dividend levy whilst imposing the same on domestic entities.
- Carry forward and carry back of losses: The ability to carry back losses for set off against a prior year profit has the potential to provide relief to companies negatively affected in these challenging times. The cap on the amount of unutilised lost items a company is allowed to carry back should be removed altogether and companies should be allowed to carry back losses to any year of assessment that has not been time-barred. This is also of particular relevance to entities with exposure to natural catastrophe risks as they typically find themselves in cycles of profitable years and when a significant disaster occurs, in equally significant loss positions.
- Loan Insurance Scheme: SMEs that secure short-term trade loans by having commercial insurers co-share loan default with Participating Financial Institutions, will see the Government providing subsidies for loan insurance premiums of 80%.
- Digital Transformation Scheme: Tax free + 1:1
- With considerable emphasis for WFH, requiring significant investments in IT, cybersecurity, data protection, and business continuity, all such investments should benefit from a commensurate amount of tax waiver in CIT.
- Additionally, the Government should propose grants of up to 10% of the company’s turnover, subject to equal quantum investment from the enterprise itself.
Environmental Measures:
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- Vehicle Scrap Scheme: (NTA data on old vehicles not researched at the time of writing this note)
- For vehicles over 15 years in circulation, given the wear’n’tear, and given the use of older technology, both fuel consumption and carbon emissions would be high, causing both increased economic and ecologic burden, not to mention increased accident risk and therefore increased insurance premium. Owners accepting to place such vehicles to scrap, to be offered a 50% reduction in import duty for fuel combustion vehicle, 75% reduction for hybrids, and 100% reduction for electric vehicles, all up to 1600 cc engine capacity.
- Vehicle Scrap Scheme: (NTA data on old vehicles not researched at the time of writing this note)
Other Propositions
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- Review property acquisition by foreigners connected with 20 year PR by reducing the investment amount USD 250K in barren land (non-agri-productive) parcels, from the current USD 375K, and by expanding the regions/schemes of acquisition. This would increase Foreign Direct Investment (FDI), as well as improve land usage.
Temple Accounts and Tax Services (TACTS) are at the forefront of assisting and advising individuals and companies on respective personal and business needs, optimising revenues, costs, taxes, and administration facilitation processes for enhanced shareholder and personal benefit.
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