Seychelles Budget Confirms Corporate Tax Rate Cut
In his 2014 Budget Speech, the Seychelles Finance, Trade and Investment Minister Pierre Laporte commented that, having recovered from the economic and financial crisis after 2008 to record five successive years of economic growth, it was time to propose measures to ensure that growth is shared with both employers and employees.
The fiscal outlook for 2013 is said to remain positive, with a revised primary fiscal balance of 5.2 percent of GDP now expected. The Government expects to collect SCR5.6bn (USD466m) in revenue, which will be 3 percent above the 2012 level, and, by end-2013, the debt-to-GDP ratio is forecast to fall to 69 percent.
With a primary fiscal surplus at 5 percent of GDP, total revenue for 2014 is forecast at SCR5.7bn, resulting from the higher collection of taxes, primarily in value added tax (VAT) revenues, due to lowering of the threshold, and personal income tax, following a 12 percent average rise in government wages and salaries, and a 20 percent increase in the minimum wage (apart from casual workers).
Laporte confirmed that, as from January 1, 2014, the business tax rate will fall from 33 percent to 30 percent, except for banks, telecommunication companies, insurance companies, breweries and tobacco producers. He believed that the lowering of that rate "for most medium-sized businesses will allow the private (sector) to absorb the increase(d) minimum wage, without the need to increase the cost of goods and services."
He further disclosed that a number of additional measures will be introduced with regards to VAT in 2014, following its revenue-neutral replacement of the goods and services tax at the same rate of 15 percent from January 1, 2013. For example, the Government will lower the threshold for mandatory registration for VAT to SR3m, causing over 100 new businesses to be registered; and introduce a VAT refund at the airport (and possibly the seaport) for non-residents.
In addition, it will exempt VAT on an additional list of goods and services, including real estate transfers, and medical supplies and services; and reduce the timeframe for VAT refunds from 45 days to 30 days.
Laporte also proposed to lower trades tax on more imported products, including the tax on electric and LPG cars, and bicycles, from 25 percent to 15 percent, so as to assist in promoting the usage of clean energy.
In measures to strengthen revenue collection by way of increased compliance in 2014, the Government will also reinforce the audit capabilities of the Seychelles Revenue Commission (SRC) to increase focus on the cross-referencing of data with other agencies and reinforce its efforts to tackle transfer pricing, and strengthen the Investigation Unit within the SRC to deal with tax fraud and evasion.
In the international financial services sector, the Seychelles International Business Authority (SIBA) expects a decline in revenue in 2013, due to Seychelles' classification by the OECD as not compliant with some of its criteria on the exchange of tax information, following a Phase 2 Peer Review.
Nevertheless, Laporte confirmed, while that Review is also likely to result in a challenging year for the sector in 2014, measures already taken and those expected early next year to strengthen compliance with the OECD's standards, mean that the Government is "confident" that the international financial sector will recover, although it "needs a new strategy" to redefine "the future of our international financial services sector and raise the profile of Seychelles (as) a modern, efficient, and reputable global financial center."
In the meantime, he reiterated "Seychelles' absolute commitment to ensuring the highest level of conformity with best international practices on transparency and exchange of information on tax matters, and in the fight against money laundering and terrorism financing."
Over the next 12 months, the Government intends to implement the enactment of new laws governing the international financial services sector, such as trust laws; ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; and sign more tax information exchange and double taxation agreements.