2024/2025 Budget Speech Highlights
Promoting better lives
The Minister of Finance and Economic Development today delivered the fifth and final Budget of the present Government’s mandate. Largely in line with general expectations, it was primarily a Budget aimed at social protection and restoration of purchasing power with a combination of subsidies and increases in social benefits across the board. The “Revenu Minimum Garanti” introduced last year, will reach the psychological figure of MUR 20,000 from July 2024. Maternity leaves are being extended from 14 to 16 weeks, whilst paternity leaves will rise from 1 week to 4 weeks.
A maternity allowance of MUR 2,000 per month is being introduced for nine months. Child allowance will increase to MUR 2,500 monthly irrespective of the number of children. Parents having children in full-time education in private schools will be eligible to an income tax deduction of up to MUR 60,000 per child. Those aged between 18 to 25 years will receive a free monthly data package. The hike in the highly symbolic Basic Retirement Pension perhaps went further than expected to MUR 15,000 from January 2025.
Business enablement and IFC strategy
Whilst the announcements were to create more opportunities, better lives of the lower income groups, improve the ease of doing business environment and labour force enhancement, it was refreshing to hear of a strategy to make Mauritius a MUR 1tn economy by 2030. For just over a decade, Mauritius has re-positioned itself by broadening its IFC services offering and established itself as a platform for regional markets. To address the current skills shortage in the economy, the conditions for work and occupational permits were softened: At MUR 22,500, the threshold for OPs was almost removed; Temporary Occupation Permit for professionals with a minimum of 10 years’ experience to reduce red tape blockages; removal of quotas on foreign labour in sectors like manufacturing, jewellery, freeport, and ICT/BPO; prolonged work permit renewal period for the manufacturing sector; and the possibility for Non-citizens with Retired Resident Permits to work without restrictions. Regrettably, there was no real attempt to reverse overseas migration of our own talents. The 24/7 opening of the CBRD operations, the digitalisation of licences, Government Gazette and legislations are commendable, and will maintain our reputation for its ease of doing business.
Green economy and Taxation
Whilst the social measures and incentives will no doubt instil the intended feel-good factor in the short term, the budget also starts to cater for longer-term challenges, including climate change. Government is making it a priority to combat coastal erosion with extensive plans to rehabilitate beaches and coast line works. Decarbonisation plans will be pursued with the introduction by the CEB of prepaid charging stations for cars. With an estimated MUR 30bn needed to adapt and face the effect of climate change on Mauritius, the introduction of a Corporate Climate Responsibility Levy at 2% on profits for companies with turnover in excess of MUR 50m, was nevertheless a surprise.
This measure will bring the actual total taxation of companies to 19% after considering corporate tax and CSR levy of 15% and 2% respectively. This Climate levy will bring in some MUR 5bn, whilst corporate taxes will separately generate an increase of MUR 5bn year-on-year on improved company profits. VAT Revenue will rise by 17% to MUR 65bn.
Conclusion
The 5-year extensive welfare programme came in a period which included a pandemic led economic contraction, the depreciation of the rupee, increasing consumer price index and an ageing population. Being a pre-electoral exercise, there were no bold structural changes to address the many economic issues of the day. With social protection taking the lion’s share with nearly one-third of total budgeted expenditure year, one has to be cautious since a high level of government intervention and spending could easily lead to higher taxes over time, and create dependency which can impact productivity in the long run. The risks of future depreciation of the rupee, uncertainty on the duration of Russia-Ukraine and Middle East conflicts and freight cost increases all have a direct and induced impact on local prices. Given these external factors beyond our control, providing more financial support seems to be the appropriate solution in the short term. In the longer term however, it is absolutely vital that the country achieves the targeted and higher economic growth, failing which the burden and pressure will be acutely felt on public debt.
