All eyes were on the Minister of Finance, Economic Planning and Development, Dr the Honourable Renganaden Padayachy, as he presented his Budget Speech 2021-22 on 11 June, against a challenging economic backdrop.
The overarching theme of this year’s Budget is ‘Better Together’, with a firm focus on recovery, revival and resilience. The Minister set out a new strategy to accelerate the pace of recovery and build resilience to sustain a high long term growth path, which will rest on three main pillars:
1 – Giving an exceptional boost to investment
2 – Shaping a new economic architecture
3 - Restoring confidence
In terms of measures to encourage investment in the economy, the Government is proposing a major reform to improve the business environment by introducing a Regulatory Impact Assessment Bill. Several incentive schemes will also be streamlined by the Economic Development Board (EDB). An Insolvency Bill will also be introduced to preserve businesses amid the Covid-19 pandemic.
The Budget contains a number of initiatives to re-open Mauritius to the world, starting with the re-opening of the borders to tourists as from 15 July 2021 as a key measure to stimulate economic recovery. Permit rules are also being amended to encourage investors and foreign talents to come to Mauriitus, with the Occupational Permit (OP) for professionals being extended from 3 to 10 years. Spouses of OP holders who wish to invest and work in Mauritius will no longer need a permit, while the Government is introducing a new category of permit, the 10-Year Family Occupation Permit, for those contributing USD 250,000 to the Covid-19 Projects Development Fund.
As for the financial services sector, as one of the few sectors which registered positive growth in 2020, the Government’s strategy is to enhance the position of Mauritius as a jurisdiction of the highest global standards and to continue to improve and deepen its service offerings. The Government reiterated its commitment to be fully compliant on AML/CFT matters and to complete the implementation of the FATF Action Plan to achieve an early exit from the FATF list of jurisdictions under increased monitoring. To this end, the Government has announced further steps including the creation of a Financial Crime Commission to ensure more effective management in this area.
The Government also announced a raft of new initiatives to promote innovation in the financial services sector, with the Bank of Mauritius set to roll out a Central Bank Digital Currency – the Digital Rupee – on a pilot basis as one key announcement, The Bank of Mauritius and the FSC will set up respectively an Open-Lab for banking and payment Solutions and a FinTech Innovation Lab to encourage an entrepreneurship culture on the island.
In terms of future prospects for Mauritian businesses, the Minister underlined that new opportunities would arise from four trade agreements coming into operation this year, namely the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) with India, the Free Trade Agreement with China, the United Kingdom (UK) - Eastern Southern Africa (ESA) Economic Partnership Agreement (EPA) and the African Continental Free Trade Area Agreement.
On the fiscal front, the Government is extending the tax holiday on Family Offices and Fund and Asset Managers from 5 to 10 years. The scope of the partial exemption regime is also being broadened to cover investment dealers and companies engaged in locomotives, train and rail leasing. Tax incentives are also being provided to encourage biotechnology and pharmaceutical companies to set up in Mauritius. These companies will be allowed a full tax credit on the costs of acquisition of patents. Companies engaged in the medical, biotechnology and pharmaceutical sector will be taxed at 3%. In general, there is no proposed change to the tax rates for individuals or companies. The VAT rate also remains unchanged.
For the fiscal year 2021/22, the GDP growth is expected to reach 9%. Total expenditure will represent 32.5% of the GDP compared to a revenue of 27.5% of GDP. The Budget deficit is expected to be contained at 5% of GDP whilst inflation has been kept under control.
Overall, this is a budget that focuses on boosting investment and economic growth in a spirit of solidarity and inclusiveness which aims to set the country back on track for the years to come.
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