Defending his chum- the trojan horse of the private sector- the very one who appointed him as the Chairman of the the Steering Committee on the Empowerment Programme, he is trying to turn him into a victim of the backlash against the National Residential Property Tax (NPRT).
A rewinding to 2006, may perhaps help us in situating the comment of our connoisseur on the NRPT.
In 2006, the economy stood at crucial crossroads; a new team of policy makers, known as the TINAs (There Is No Alternative) set out to craft a new socio-economic model - a model based mostly on the reports of the Bretton Woods institutions, namely the IMF Report "Fiscal Adjustment Strategy and Measures to Protect Low-Income Households", "Mauritius: From Preferences to Global Competitiveness" , an unpublished World Bank Report , and the " the 2006 First trade and Competitiveness Development Policy Loan".
The last report notes that… "Phased reductions in tariffs and personal and corporate taxation will result in revenue losses, but these will be offset by a new National Residential Property Tax, higher excise duties on a number of products, and an adjustment of lease rates on public land to market levels. The IMF expects the net impact will be slightly negative, though this does not take account of improved tax administration through operationalizing the Mauritius Revenue Authority and increasing deductions at source."
The TINAs set down to implement the recommendations of the report which prescribed, among others, an austerity package and painful restructuring plans that involved improving competitiveness and ensuring cost-effectiveness in education, health care, the public sector, social security and pensions, including the NRPT. Hard decisions that were going to hurt immediately but yield handsome dividends in the long term .
At the same time the austerity measures started biting and we had a series of outcries from the population. The mood of the nation had become hostile thanks partly to the uncontrolled inflation and a rise in inequalities. The middle class and the political elite were feeling the pinch and like what they did to the previous regime in sabotaging the educational reform programme , they suceeded in postponing the implementation of the NRPT pretexting that its hasty implementation without adequate preparation and without careful thinking, may have some serious implications that need to be studied , including the development of a proper Cadastre Unit under the Land Administration Valuation and Information Management System (LAVIMS) Project.
One after the other, the reforms were watered down depriving it of much of its gist-a rolling back much of the whole reform agenda. The TINAs showed that they did not have the mettle to drive forward the ambitious reform programme.
They backtracked on the reform agenda giving way to the more risk-averse strategies driven by popular sentiment. Our TINAs ended up ,ducking major decisions and it has just been plain old statist thinking -a series of spineless decisions in a climate of policy paralysis- for the following years.
But that’s not the whole story; our narrative of the reform agenda took a strange twist-a twist in favour of the private sector oligarchs.
Our trojan horse, dutifully carrying out the agenda of his backers and sponsors, while trying to impose higher property taxes on the middle class , slashed corporate taxation, gave huge promotion budgets to the tourism sector, and most importantly, ensured that the EU compensation money for the restructuring of the sugar industry went to the sugar barons.
Despite the outcry (even our dear Pinocchio had joined in), the private sector boy didn’t give in. This time he didn’t retract.
The reason for his failure to consolidate fiscal revenue was because of the largesse extended to the private sector in terms of reduced corporate taxation . We are still paying the price till today !
The IMF 2007 Article IV Consultation had noted.. " …the budget deficit is still high as efforts at fiscal consolidation have only reduced income and corporate tax rates and weakened the revenue base while expenditure is still to be reined in." Moreover, the new dependence of the budget on substantial EU grants money, in compensation for sugar reform and the slow progress with respect to pension or civil service reform were also highlighted.
Moody’s , in August 2007, had also recommended ,in their proposals on budgetary savings, that Government “stops reducing corporate income tax rates'.
Some of the IMF revenue enhancing measures :
-Phase out import exemptions on import duties (0.3 percent of GDP)
-Remove exemptions on excise duties (0.2 percent of GDP)
-STOP REDUCING CORPORATE INCOME TAX RATES (0.1 percent of GDP)
-Eliminate remaining exemptions and allowances in the income tax (0.1 percent of GDP)
To conclude :
So the comment of « Un ministre juste et rigoureux qui a tenté de mettre fin à cette discrimination mais Rama Sithanen a été victime d'une campagne démagogique et communale » need to be revised to include the fact the NRPT was one of the proposals in the reform agenda of the IMF-WB on which he backed out; whereas the largesse to the Private Sector - he , however, did not meet the same fate à la Paulo in terms of " une campagne démagogique et communale "- was not among the recommendations of the IMF-WB.
