Call for taxes in rupees shows reform success


04-June-2009

Mrs FanchetteMarie-France Fanchette told reporters the abundance of foreign exchange and the wish by certain businesses to continue paying in hard currency shows a turnaround of the economic situation after the launch of the reforms last November.

For many years Seychelles was short of forex and asked businesses whose earnings are mainly in foreign exchange to pay their taxes in hard currency.

But with the Ministry of Finance now receiving between R75 million and R100 million in foreign exchange, the government has reversed the requirement and from June 1 it will accept tax payments only in rupees.

The move is designed to help the local currency appreciate further, Mrs Fanchette said.

The payments government wants made in local currency include business tax, goods and services tax, trades tax and social security contributions.

“The law clearly says taxes should be paid in rupees, but it so happens at a certain point a decision was made that we could accept payment in foreign exchange,” she said.

“That had to do especially with the tourism sector because we know they collect the bulk of their earnings in forex, hence at the time we said ‘why not [ask them to] pay in foreign currency?’

“We have, however, reversed this decision and as from June 1 we are asking that tax payments be made in rupees.

“We will no longer be in a position to accept payments in foreign currency except for very exceptional cases, like from those who are not resident here and have no agents in Seychelles but have property they need to pay tax for.”

Mrs Fanchette said since ministries no longer maintain accounts as they did before, if a foreign exchange payment comes it will have to go to the Central Bank, which maintains a small amount of foreign exchange in an account for payments that cannot be made in rupees.

She said some people have asked if they can pay in forex so they are not charged commission by banks when they convert the money into rupees, but she said the ministry can no longer entertain payments in foreign exchange.

“Payments should not be in foreign money when the rupee is floating and is now parallel to the other major currencies on the market,” she said, adding that the Central Bank is supporting the move because “it is better that the rupee comes into the bank”.

She said “paying in foreign currency means it is the forex that is going into the bank not the rupee, which we would like to see appreciate”.

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