Seychelles Executive Summary
The Very Model Of A Modern Archipelago
The
Seychelles are a byword for tropical beauty.
The 115 islands, near the equator and outside
the cyclone belt, are indeed unspoiled. The
main island, Mahe, has an airport and a very
good port, Victoria. Most of the 87,000 inhabitants
live on Mahe, and are a blended mixture of French
and African, speaking Creole, but also English
and French, especially in business. The British
granted independence only in 1976; the Seychelles
are an independent democratic republic with
a presidential style of government. The President
from 1977 until 2004, Albert Renee oversaw the
conversion of a 'fishing and bananas' type of
economy into a modern tourist mecca, alongside
a carefully created offshore financial centre
which has taken good notice of its competition.
Economy Dependent On Tourism
The
service sector contributes 70% of the Seychelles's
economy, which is based on tourism, fish processing
and commerce. The International Trade Zone is
successful, and the Seychelles are on the way
towards becoming an Indian Ocean trading entrepot,
which is their avowed goal. The Government is
torn between Colbertian paternalism (very French)
and economic liberalism (very English) and it
is hard to say which is winning.
Until
late 2004, when the tsunami did substantial
damage, there was growth but also unemployment
and a deficit. The local population is not always
willing to be cast in the role of economic superstars,
to the despair of the Government, which privately
would like the Seychelles to be a new Singapore.
A macro-economic programme under the acronym
MERP, launched in 2004, aimed to correct fiscal
and economic imbalances with increased taxation
and government retrenchment. The commodity price
spike, a shortage of currency reserves and high
inflation has prompted a further round of fiscal
tightening after the
country defaulted on much of its debt in mid-2008,
when the government turned to the IMF for financial
assistance.
The Seychelles' Lowtax Specialisations
The
Seychelles have territorial taxation; thus only
locally-sourced income is taxed. There is recent,
well-formed legislation for International Business
Companies, Offshore Banks, Insurance Companies,
Mutual Funds, Trusts, and extensive programmes
of investment incentives, as well as the International
Trade Zone, all of these being basically free
of taxes. In 2003, the government legislated
for additional types of company: Special Licence
Companies, Protected Cell Companies and Limited
Partnerships.
It is easy to form corporations, and privacy
is reasonably assured. There are tax treaties
with a number of countries, including China.
Banking and shipping are the Seychelles' two
main 'offshore' industries. The Seychelles started
to create an IOFC only quite recently, but by
2008, more than 50,000 companies had already
been registered. The Trade Zone is probably
the most successful aspect of the offshore initiative,
and that has more to do with trade than tax.
Moderate Taxation For Local Business
Locally-sourced
profits are taxed at up to 40%, and so-called
'social security' contributions amount to an
income tax at up to 40% for individuals for
all sectors other than the Trade Zone. There
are no other taxes to speak of. There is a small
withholding tax for some types of payment. All
foreign-source income is tax-free. VAT has just
been introduced, and there are import duties,
but these have been reduced substantially in
recent years. The Government's extensive investment
incentive programmes give substantial tax benefits
to incoming investors in many sectors; and the
free zones are ideal for locating regional distribution
centres. No company with exclusively external
assets and commercial operations will pay tax.
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