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Realistic and surprisingly popular
Except for a minority, the budget seems to have been welcomed by the general public. The minister of Finance, Rama Sithanen, had kept stressingthat the country was facing extremely tough conditions and that only discipline and sacrifice could help. Mauritians had heard these words so many times that many had expected a very austere budget that would make their lives even more difficult. But minister Sithanen has managed to treat the population gently while ensuring growth for the country. This is at least what the budget measures promise if the government implements them in due time.
There is no doubt that Rama Sithanen has left the beaten track. Chartered accountant Clency Appavoo speaks of “zero-based budgeting”. In other words, the minister decided to ignore the way things had been done so far to set up a new post-preferential economic model where investment and job creation are the driving forces for growth. But this could only be achieved by “releasing the Mauritian genius from the shackles of sterile routine and insularity, while placing it on the path of openness, initiatives and discipline,” as pointed out by economist Pierre Dinan.
The situation was clear before the budget: “There are serious imbalances in our external trade. The balance of payments has been in the red for two years in a row. And we have been left with a very high budget deficit and an excessive public debt,” stated the minister right at the beginning of his speech. The tone was set. Only remedies remained to be prescribed.
The public was worried that the minister would choose to increase the value added tax on consumer products. Indeed, this would have been the easier way of bailing out the State’s accounts. But this was also the best way of preventing a correct growth rate that would allow the country to get back on its feet in the long-term. As a result, taxes have even been reduced on some imported products to boost consumption and support growth.
The incentive of the government to eliminate income tax for 40,000 taxpayers is another measure that should boost consumption. The minister has totally revamped the tax system and low-earners are be the great winners. Those exempted from income tax will, according to minister Sithanen, have additional revenue of Rs 12,000 a year.
Measures to boost investment</B>
Just like the individual, the private sector will benefit from a decrease in corporate tax. If it now reaches 22,5%, it should experience a drop every year to finally achieve a 15% rate in July 2009. Hence, it is no surprise that the private sector has expressed its satisfaction about the measures taken to boost investment and creation of small and medium enterprises.
While many unionists claim that this budget has been “ordered by the World Bank”, the Joint Economic Council president, Jacques de Navacelle, is “happy about all the decisions aimed at more openness to foreign expertise and finance. Openness can however be achieved only if all red tape is removed. This budget involves a new approach that ignores a previous method full of authorisations and permits for free-entrepreneuriat followed by strict measures of control”.
The minister indeed announced measures to attract foreign investment and expertise. If many find them positive, some medical professionals are a bit scared of such openness. Dental-surgeon Jérôme Bhunjun believes some measures are exaggerated. “Enabling all those bringing USD 40,000 to settle in the country with a work permit and facilities for a residential permit may only bring heaps of ‘retired professionals’ from Europe who only want to take advantage of the country. Many of us are already living from hand to mouth and with the Mauritian syndrome that foreigners are better than local doctors, this could make our situation even harder.”
If the objective is achieved - a high growth rate boosted by private investment and consumption - there is no doubt that unemployment will go down. “Unemployment is at its highest level in twenty years while there is a mismatch of skills that prevents expansion in several sectors,” warned Rama Sithanen.
In view of the situation, the minister has announced more flexibility in labour laws. He ensures that it is aimed at protecting workers who should find it easier to change profession in case of problems in one sector. Similarly he will make sure the fate of unemployed and unskilled women changes. Thanks to the “empowerment programme”, the government wants to reduce unemployment among women - far higher than men – and make sure they have proper skills and facilities to start a new job or their own business.
For the opposition, the budget is a capitalist one that doesn’t match the promises made by the government before the elections. MSM leader, Pravind Jugnauth, even said the budget is “fooling people first” as a parody of the famous “putting people first”. MMM leader, Paul Bérenger, has expressed his disagreement with this “ultra-capitalist budget that fools the most vulnerable”.
Parliamentary debates on the budget promise to be stormy before it is adopted in a few weeks…
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