IX. SOUND MACROECONOMIC FUNDAMENTALS
260. As in the past three and a half years under the stewardship of this Government, fiscal integrity will remain a cornerstone of our macroeconomic policies.
Budget Outturn
261. The Budget Deficit for the current fiscal year would turn out to be 3.2 percent of GDP, with total revenue of Rs 106.8 billion and total expenditure of Rs 122.3 billion.
262. The deficit in the recurrent budget would be lower at 1.7 percent of GDP compared to the previous Estimates of 2 percent.
263. As for public sector debt, it is estimated to decline from 64.8 percent of GDP at end June 2017 to 63.4 percent by end June 2018.
Budget Estimates for 2018-19
264. I will now summarize the Budget Estimates for 2018-19. Total expenditure will amount to Rs 133.8 billion, of which Rs 115.9 billion for recurrent spending and Rs 17.9 billion for capital expenditure. The revised estimate for capital spending in 2017-18 is Rs 15.7 billion.
265. Total revenue is estimated at Rs 117.4 billion, including tax receipts of Rs 99.7 billion, non-tax and other revenue of Rs 8.8 billion and grants of Rs 8.9 billion.
266. The overall budget deficit for 2018-19 will amount to Rs 16.3 billion, that is 3.2 percent of GDP.
267. An amount of Rs 9.5 billion has also been provided by way of loans and equity injection for implementation of various projects. This will bring the total capital outlay in the Budget to Rs 27.4 billion.
268. On the financing side, during 2018-19 we will be borrowing
Rs 2.6 billion from foreign sources while we will be repaying
Rs 4.4 billion of foreign loans. We will be raising some
Rs 27.4 billion, on a ‘net basis’, from domestic sources.
Public Sector Debt
269. With the policies and proposals announced in this Budget, we expect public sector debt to further decline to 63.1 percent of GDP by end June 2019.
270. The share of foreign debt in total public-sector debt will be further brought down to 18 percent from 19.5 percent at present.
271. I would here like to reiterate the commitment of Government to continue to pursue sound fiscal policies in order to bring down the public sector debt to GDP ratio to the statutory level.
Strengthening Accountability and Transparency
272. I believe that taxpayers deserve the utmost in accountability and transparency. Each ministry and department is required to submit an annual report on its performance every year. Yet the level of compliance is still around 80 percent only.
I am therefore requiring that by December 2018, we need to have a compliancerateof100 percent.
273. On expenditure management we cannot overlook the weaknesses that the Director of Audit has brought to light. When things go wrong in public finance, we must get them right. The Finance and Audit Act will be amended for Ministries and Departments to include an implementation plan in their Annual Report for preventing recurrence of shortcomings reported by the Director of Audit.
Tax Policies
274. I will now announce our tax policies.
275. The Solidarity levy on telephony service providers which was introduced in 2009 will be extended until June 2020. And the requirement for book profit of a company to exceed 5 percent of its turnover to be liable to the levy is being removed.
276. The current formula for Special Levy on Banks which is scheduled to end by June 2018 will be maintained up to June 2019.
277. A final withholding tax of 10 percent will be introduced on the winning amount exceeding Rs 100,000 obtained from the Mauritius National Lottery - ‘Lotto’ and Government Lotteries - ‘Loterie Verte’. The 10 percent tax will also apply to winnings in excess of Rs 100,000 in casinos and gaming houses.
278. I now turn to income tax.
279. Madam Speaker, the flat income tax rate of 15 percent for all individuals is an unfair taxation model with negative consequences on our socio-economic fabric.
280. Indeed, between 2006 and 2014, income inequalities have been on the rise, with a decline in the purchasing power of the poor and the middle-income class.
281. The very essence of our Government is to work towards reducing the gap between the rich and the poor and incentivise people to work. Sustainable economic growth and economic development cannot be achieved without the integration of the population, social justice and economic empowerment.
282. This is why, since my first year as Minister of Finance in this Government’s mandate, I implemented a monthly subsistence allowance for some 6,400 individuals who were on the Social Register to completely eradicate absolute poverty in this country.
283. Last year, we introduced an innovative model of taxation, the negative income tax regime for all working individuals earning less than Rs. 9,900 monthly.This historic measure is so far supporting some 75,000 working individuals. We also implemented the national minimum wage to ensure that no individual is today paid a meagre salary for the hard work they are doing.
284. Madam Speaker, just as we give support to the lower end, we are in no way forgetting the middle class.
285. Since December 2014, we have engaged in corrective measures to bring social justice to the middle-income earners. Since the Government’s first budget, we have increased the income exemption threshold by a minimum of Rs. 25,000 for those with no dependent and some
Rs. 65,000 for those with dependents.
286. This year, we are going much further.
287. We are increasing the income exemption threshold of all employees by Rs 5,000. Hence, an employee with an annual income of Rs 305,000 will not have to pay any income tax.
288. Madam Speaker, when we look at the latest figures from Statistics Mauritius, more than 60,000 employees today gain less than Rs 50,000 monthly. It is unfair to put the same taxation burden on them.
289. That’s why, for those earning between Rs 305,000 and
Rs 650,000 annually, I am decreasing the income tax rate from 15 percent to only 10 percent.
290. Income tax payers earning a maximum of Rs 50,000 monthly will hence pay up to Rs 18,000 less in income taxation annually.
291. Madam Speaker, this is an unprecedented measure which will increase the income of households and offer a much-needed respite to the middle-income class.
292. Madam Speaker, this measure will bring greater fairness and equality in our tax model and a higher level of social equity.
293. Madam Speaker, we are going further in our income tax reforms.
294. For employees who receive a lump sum as severance, pension or retiring allowance, we are increasing the exemption threshold from Rs 2 Million to Rs 2.5 Million.
295. Madam Speaker, we are aware that a number of retired individuals continue to receive a minimum emolument amount and we do not want to burden them with excessive taxation.
296. Madam Speaker, a retired person will now be eligible to the enhanced income exemption threshold granted to retirees even if he derives emoluments provided that such income does not exceed Rs 50,000 in an income year.
297. Before concluding, I would like to express my appreciation to all the organizations, professional groups that presented papers, as well as to all Mauritians who have taken time to express their insights and ideas on what this Budget should be about. Their contributions have indeed helped to shape this Budget.
298. Let me also announce that the Budget Speech documents include an Annex which is an integral part of the Budget and which gives greater details on some of the measures, policies and legislative amendments. We are also circulating a Budget Supplement on the performance of the economy and the 3-Year Rolling Plan.
299. And I would like to thank the Financial Secretary, the staff at the Ministry of Finance and Economic Development and my staff and advisers at the Prime Minister’s Office who have worked diligently on this Budget. Let me also express my gratitude to all my colleague Ministers, Parliamentary Private Secretaries and Members of the National Assembly for their contribution.