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Seychelles Able To Avoid More Tax Measures

by Lorys Charalambous, Lowtax.net, Cyprus
07 August, 2014

The Seychelles Government has announced temporary financial measures, which will lead to higher interest rates and reduced lending, but which, it was said, will not be joined by any changes to taxation.

Finance, Trade, and Investment Minister Pierre Laporte pointed out that the economy has remained buoyant, despite a slowdown in tourism in the first quarter of 2014, and demand for foreign exchange has surpassed receipts, largely due to a 13 percent increase in borrowings this year by the construction industry and the wholesale and retail trades.

After the increase in short-term interest rates, the Central Bank of Seychelles Governor Caroline Abel confirmed that interest on bank credit for imports can also be expected to go up. In addition, since motor vehicles constitute a strong segment of imports, the Finance Ministry is also considering a freeze on imports of certain categories of cars whenever these are part of government subsidy schemes.

However, Laporte made clear that the present temporary measures are in no way similar to the "drastic action" taken during the reform program of the last five years, which included the introduction of a value-added tax (VAT) regime and an overhaul of income and business taxation.

He disclosed that revenue collection is on target for income tax, VAT, and excise duties, although business tax has dropped for the first half of the year, linked to the temporary closure of Seychelles Breweries.

Laporte also dismissed suggestions that repayment of Seychelles' external debt is in any way linked to the present situation, noting that debt servicing is on schedule and that foreign exchange reserves now stand at the equivalent of four months of imports. The Seychelles Government has pledged to bring the country's public debt to within 50 percent of gross domestic product by 2018.

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