May 12, 2006

TROUKLER

MINISTER DUGASSE SHOWS LACK OF GRASP OF HIS MINISTERIAL BRIEFS

The Minister of Planning and Employment, Jacquelin Dugasse, showed either his lack of knowledge of the issues surrounding the Economic Partnership Agreement (EPA) being negotiated between the EU and the African, Caribbean and Pacific (ACP) states or he has been grossly misled by his officials.

Upon his return last week from Belgium where he was representing the Government at the gathering of ACP states Ministers, Dugasse told the state controlled media in Seychelles that the issue he went to discuss was whether tuna exported by Heinz from Seychelles would be slapped with a 24% duty by the EU once the Cotonu agreement runs out in 2008. His brief, he seems to say, is to try and stop it.

The Cotonu agreement was reached between the EU and former British and European colonies known as the ACP states, which allowed a whole host of commodities from these states to enter the EU tax free. Hence the reason Heinz came to Seychelles. Now the EU has decided not to renew the Cotonu Agreement, because, the EU says, under the terms of the World Trade Organisation (WTO) treaty the EU will no longer be able to protect ACP states with tax free concessions since all countries will be able to get the same treatment.

In the context of tuna packed in Seychelles, this means that now in the EU we have to compete with Thailand, Indonesia and the Philippines whose labour cost is much lower than in Seychelles, without the protection of duty free entry. This may mean that packing tuna in cans in Seychelles will no longer be viable. Seychelles may be beautiful to EU tourists, but at home they care about their wallets.

A CONFUSED DUGASSE, MIXED UP IN HIS DTA

The Minister of Economic Planning and Employment Jacquelin Dugasse returned to Seychelles from Brussels last week to announce that he had signed a Double Tax Avoidance treaty (DTA) with Belgium. In his usual style, Dugasse wanted to impress the local government owned media with his knowledge of economic and commercial issues. On this one Dugasse was definitely out of his depth and as confused as to what he signed, just as he was on the EPA matter he was supposed to have gone to discuss.

According to Dugasse, the DTA with Belgium will make it possible for a Belgian company to register and do business in Seychelles and don’t have to pay tax in Belgium on the profits made in Seychelles. Dugasse then went on to explain how a foreign company which has been licensed to set up as a wholesale distributor in Seychelles will not need to pay taxes in Belgium.

In actual fact the DTA treaty is not meant for that kind of commercial undertaking at all since there will not be many Belgian companies that would be established to do business in Seychelles, just as there are few Chinese companies established to do business in Seychelles as we also have such a treaty with China. Hence, the DTA treaty is beneficial not to Belgians, but to companies and nationals of countries other than Seychelles and Belgium that conduct business in Belgium, where they have to pay a tax called a withholding tax when they repatriate profits in the form of dividends  to their own countries.

What the Belgium-Seychelles treaty does is to entice non-Belgian owed companies who wish to do business in Belgium to set up a special-licensed company in Seychelles and then used this company to conduct their business in Belgium.  This special licensed company, authorised by a law in Seychelles, pays only 1.5% tax on all their profits which they make from their activities anywhere in the world. So if they claim they have paid this tax to the Seychelles Government on the dividends they have accrued in Belgium, this amount is deducted from the withholding tax they would have ordinarily paid in order to repatriate this dividend from Belgium. Complicated?

This seems to be so for Jacquelin Dugasse. No wonder JJ is in trouble over the economy and another reason why its time to dump them.