‘Seychelles needs to create a sustainable economy with sustained growth’ |27 July 2017

“Seychelles needs to create a sustainable vision for its children, grandchildren, relook at its model, transition and move forward. You cannot collect more tax when there is nothing to tax.  Also, we cannot rely on tax from 100,000 citizens. We need to expand our base. We need to create a sustainable economy with sustained growth.”

This was said by the chairman of the Forum on Economic and Fiscal Policy (FEFP) Dr Ramon Dwarkasing

during a session yesterday on challenges, opportunities and consequences of globalisation for the Seychelles and its tax system.

The session, which took place at the Care House, was hosted by the Seychelles International Financial Services Association (Sifsa).

Dr Dwarkasing, a professor in transfer pricing, explained the socio political conditions in Europe which are influencing tax policy. The three main indicators are:

1)    The UN sustainable development goals which have provided a framework to address poverty and increase living standards in developing countries  - To do this the investment needs are USD 3.9 billion.  The current collections are 1.4 billion.  Therefore, public-private partnerships to create wealth and raise the balance are required;

2)    Trends in globalisation towards localisation, direction of technology transfer in all directions;

3)    OECD / G20 Framework on Base Erosion Profit Shifting;

Each country wants more taxes for its development. One of the major worries on government is that large multi-nationals use different tax regimes to reduce their taxes. They feel that these strategies deprive the EU governments of tax revenues and contribute to unfairness. He also stressed on “SMART regulations”, a move to R&D, education, innovation, digitisation, entrepreneurship, a promotion of SMEs. 

On Seychelles, Dr Ramon stated that it needs to be careful what agreements/treaties it signs. Although sometimes due to our tiny size we have no option, he did suggest we collaborate with other small island states and negotiate with the “big boys”.   

He explained that to collect taxes one has to have something to tax.  Tax is a percentage of revenue.  0% tax of 0 is 0.  In framing a tax policy, you need to consider other factors such as climate change, social issues, economic growth etc.  One cannot look at tax in isolation.  Also, tax cannot keep changing with politicians.

The government first has to stimulate the economy, create sustainable growth so that they could collect taxes. For the financial services model, he said that the current model could generate income for 3 – 5 years but there was a need to transform so that the sector adds more value, more substance in line with global trends.  

He highlighted the risk of relying only on tourism.  He also asked why every Seychellois should be a waiter or work in a hotel?  

“We need innovative thinking to use our resources. We need to invest,” he said.

He said there is a direct linkage between investment in R&D and tax collection. In The Netherlands’  offshore/midshore sector the government is investing heavily in education and transitioning to other sectors. As a small island we need to increase productivity per person.

The chair of the meeting, Steve Jardine, suggested that all stakeholders sit down at a meeting, work out how to transition the financial services sector model and move forward – a domestic think tank.

The Financial Services Sector has been pushing for a reset of the sector since 2014.   It now has to transition to ensure sustainable growth and development. With legislation for a number of value added products, a capital market, a stock exchange a transition is possible but the private sector needs the government to facilitate and encourage this to move it forward.   

“We need swift thinking and execution before it is too late,” he urged.