The government of Seychelles will announce a series of tax reforms by the end of April aimed at broadening the business tax base and realigning the tax rates, a government official said on Thursday.
The Minister for Finance, Trade, Investment and Economic Planning, Maurice Loustau-Lalanne, made the announcement at the launch of a Tax Policy Review report 2020 published by the Organisation for Economic Co-operation and Development (OECD).
The report was launched at the Savoy Hotel Resort and Spa via Skype from France as the experts could not travel to Seychelles due to the coronavirus outbreak.
Seychelles sought the assistance of the OECD in March 2019, to review its tax system and come up with a Business Tax Regime that was simple and did not discriminate against certain sectors.
“The start of this assessment has been with the review of the Business Tax, as Government aims to level the playing field, reduce the tax burden on investors where it is present, and encourage entrepreneurship to flourish,” said Loustau-Lalanne.
The report was launched via Skype from France as the experts could not travel to Seychelles due to the coronavirus outbreak. (Seychelles Nation) Photo License: CC-BY
In Seychelles, a group of 115 islands in the western Indian Ocean, the tourism, agriculture and fisheries sectors enjoy the lowest business rate, at 15 percent, as well as a tax-free threshold on the first SCR250,000 ($18,000) of profit.
On the other hand, small businesses that are sole traders with a taxable income of less than SCR 1 million ($73,000) can either opt to be under the Presumptive Tax regime, where they pay 1.5 percent only on turnover.
Small businesses can register under the normal regime with exempted taxes on the first SCR150,000 ($11,000) profit. They start paying taxes at 25 percent if their taxable income is between SCR150,001.00 to SCR 1 million, and graduate to a tax rate of 30 percent with a taxable income of above SCR1 million.
The high-end sectors which include telecommunications services, banks, insurance companies, alcohol and tobacco manufacturers, a 25 percent rate are levied on the first R1 million profit and above that the threshold they are charged at 33 percent.
Business tax is approximately 18.5 percent of the total taxes collected by the government.
“There is a need therefore to bring some uniformity, fairness and equity in our business tax regime. The need to harmonise the business tax rates in the coming years by applying a new business tax rate schedule that applies to all businesses is our top priority,” said the Minister.
Among the recommendations proposed by the OECD is the need to harmonise tax rates across sectors to ensure a more evenly distributed business tax burden.
OECD’s representative, Bert Brys, said, “This would entail lowering statutory tax rates on many operators while increasing tax levels on those that currently contribute little to the collection of revenues.”
The report also recommends broadening the business tax base by better targeting tax incentives and that the Seychelles’ International Trade Zone regime should be phased out or scaled back as it is very generous since the incentives provided are numerous.
The Principal Secretary for Finance, Damien Thesee, said the recommendations would not mean higher tax rates but rather a more levelled playing field.
“For those paying a higher rate of 30 percent, we decided that we could reduce it to 15 percent as it would mean revenue loss. The recommendation was that we maintain the 15 percent on the first 1 million rupees of profit, and we implement a 25 percent tax rate above that 1 million. So those which were paying 30 percent will see a decrease in the amount they pay”, explained Thesee.
Not all OECD recommendations will be implemented and the Finance Ministry will present the recommendations that will be implemented for the business sector to the government, at the end of April.
The report follows two consultative meetings held in Seychelles in July and October last year with all business sectors.
Source: Seychelles News Agency