Finance principal secretary Damien Thésée expounds on 2020 budget | 04 November 2019
Budget allocation calculated to meet surplus of 2.5% of GDP
A budget allocation of R9.2 billion, around 9% more than 2019’s R8.4 billion, has been calculated in such a way as to allow the country to meet its budget surplus of 2.5% of gross domestic product, which is equivalent to R611 million.
Seychelles has been aiming for a fiscal surplus of 2.5% for each end of year in order to reduce debt-to-GDP (gross domestic product) ratio to 50% or less by 2021.
However principal secretary for finance, Damien Thésée, explained that the Ministry of Finance, Trade, Investment and Economic Planning is “concerned” about the impact of the US $30 million that the government has pledged to Air Seychelles on this debt-to-GDP target.
The sum is to be disbursed to Air Seychelles through an annual allocation of US $6 million over the course of five years.
The airline recorded massive losses in 2018 after which President Danny Faure announced, in his 2019 state-of-the-nation address, that the government would subvent Air Seychelles through its transformative process with the financial aid.
In a previous interview, the Minister for Finance, Trade, Investment and Economic Planning Maurice Loustau-Lalanne described Air Seychelles as a potential fiscal risk for the country.
“If we did not have that commitment, we would have achieved our debt-to-GDP goal by 2021 quite comfortably,” revealed PS Thésée during an interview at Liberty House on Saturday.
He nonetheless stated that the next two years will give the ministry “enough time to evaluate the situation to ensure that we reach our target”.
In regards to the budget allocation for wages and salaries, which stands at R3 billion, PS Thésée observed that this is an area which has seen a major increase.
For the first time, wages and salaries have surpassed the allocation for goods and services which is slightly lower at R2.9 billion.
“We have seen a lot of pressures regarding salaries by various lobbying groups – the National Assembly and employees themselves for instance,” PS Thésée expressed.
Again, PS Thésée said that the ministry is monitoring this shift so as to ensure that the government’s salary allocations are sustainable.
Capital projects would be an area of great priority for the government in 2020, PS Thésée further stated, and this is to address current infrastructure challenges, particularly in the education and health sectors.
These are the two sectors that have received some of the largest chunks of the budget pie – more than R1.107 billion for health and R945 million for education.
“We have a lot of ageing infrastructure from schools to hospitals that need to be renovated. We have struggled a bit in the past with projects that have been allocated funds but that have seen delays in execution.”
“In 2020 we expect some of these projects to materialise. For instance we have some ongoing infrastructure renovations on schools as well as some new schools that are to be constructed such as the new agriculture and horticulture school, and La Rosière school.”
Other government infrastructure that are going to be constructed are the new buildings for the judiciary, the Attorney General’s office, the police headquarters and the government house.
In regards to taxation, PS Thésée touched on the non-monetary benefits tax, which employers have to pay for their employees, and which will be revised in 2020 from its current rate of 20%.
He noted that the rate of 20% was too low and that the revision is needed in order to update the rate to current market value.
Non-monetary benefits that employees receive include transportation, food and accommodation.
“However we are removing this non-monetary benefit tax on medical tests that businesses pay for the candidates they are about to recruit,” PS Thésée revealed.
“We are also doing away with the taxes paid on insurance that the employers were paying on accommodations for their employees with a view to encouraging employees to insure the belongings of their staff. If any incident occurs – a fire or a break-in – their properties will be protected,” he added.
As from January 2020, business tax for residential dwellings is expected to reduce considerably, going from 15% to a strikingly low 3%, a measure that has been taken with the hopes that landlords will pass on this reduction to their tenants.
A point which PS Thésée heavily stressed on, stating that the government will be holding discussions with landlords on the matter to make sure that they are not the only ones to benefit from this change.
According to the principal secretary, the government is doing its part to reduce the cost of renting in Seychelles even as they face significant losses in revenue which they were used to collecting from residential property owners.
“We really hope that the consumers will feel this decrease even if we are in liberal market. We know of the challenges, the fact that housing is expensive and rare, and the government has done its part to improve this situation.”
Also related to tax, PS Thésée further explained that fishermen and artists will no longer have to pay personal income tax although “we have agreed that there will be discussions in regards to them paying a flat fee”.
Meanwhile, the government is looking to revise the Corporate Social Responsibility (CSR) Tax andTourism Marketing Tax (TMT) that are being charged on revenue with the intention of making them fairer to businesses since they were being taxed on revenue rather than profit. This means that certain businesses were being doubly taxed.
Therefore CSR Tax and TMT will be made creditable to business tax until the government eventually eliminates them completely.
“As an initial measure, businesses that are paying these taxes can claim it against business tax. When we find that we can sustain this loss in revenue, we have intention to phase it out,” PS Thésée noted.
The proposed budget for 2020 was presented by Minister Loustau-Lalanne on Thursday October 31 and the two leaders in the National Assembly – leader of the opposition and leader of government business – will provide their reactions to it tomorrow, Tuesday November 5.
By Elsie Pointe