The Seychelles Chamber of Commerce and Industry (SCCI) are urging the Government to take immediate steps to restore the full convertibility of the rupee. “The matter needs to be addressed immediately to avoid the economy going to a hyper-inflationary situation.” Hyperinflation is what is taking place in
The SSCI made the exhortation in proposals made by a high delegation of the organisation last week to the Minister of Finance, Mr Danny Faure. The meeting was at the invitation of Minister Faure who wanted the input of business on the preparation of the 2008 budget. A summary of the issues discussed with the Minister is contained in a document which the SCCI made public this week.
“The lack of convertibility of the rupee is the most important impediment to sustainable economic growth,” the document said. It went on to criticise what it called the “gradual devaluation” of the rupee as “not conforming to any pre-determined monetary policy. It is therefore incumbent upon the Central Bank to explain what it is trying to achieve. The absence of any policy pronouncement on the issue is having a major impact with sudden increase in prices generally. Stock replacement at unknown future costs due to the daily devaluation coupled with price controls is causing uncertainty in the market place”
The document urges government to create a level playing field in regards to taxes and other concessions being offered to investors, especially foreign investors. “Whereas tax concessions may be necessary to encourage and attract investment in areas otherwise not considered viable by investors, such concessions and incentives must be applied fairly, evenly and in a non-discriminatory manner to all investors whether foreign or domestic.”
The document also levels a veiled criticism at the government, which, in the past, would attempt to recover revenues foregone to new investments by increasing taxes or license fees on other sectors of the economy. “… Revenue foregone through the granting of incentives cannot be recovered from other sectors of the economy as this effectively means that these sectors are subsidising the new investors and has the effect of negating any benefits derived from the new investments.” The document points out that new investors under incentive schemes pay less social security tax than existing or established businesses. It called on the government to make incentives apply to all, as a matter of right, in conformity with the Constitution.
The SCCI also urges the Government to abolish the price or margin controls currently being imposed on imported goods, such that when it comes to collecting GST at the port, the tax is calculated not on the landed price or CIF value but on the maximum mark-up price, thus effectively negating the benefit of the mark-up. The maximum mark-up regulation is working against importers when it comes to pricing goods under the changing daily exchange rates. It also treats every imported goods as if it will be resold since GST is based on its resale price “determined” after the maximum mark-up is imposed.
The document says that business recognises that Government must raise revenue. However, the country must, in order to be able to “continue to guarantee a fair and sustainable level of social development for all, as well as the continual improvement of the standard of living”, also have a “fair, efficient, more equitable but economically neutral taxation system aimed at levelling the tax burden …” . It says that such a system “must be put in place as soon as possible to avoid strangulation of the wealth-creating sectors of the economy”.
The document urges government to collect GST at the point of sale, i.e. at the shops, as the law itself anticipated. It also urges Government to introduce a VAT style credit system to remove the current anomaly where GST is taxed twice on goods that are processed (inputs) before they are resold as finished products or services. Under the credit system of VAT, taxes paid on inputs are claimed back against the VAT that has to be collected on the finished goods or services when sold to the final consumer. This, the SCCI says, is a more neutral and fairer form of taxation.
The SCCI urges government to abolish the current licensing act and to introduce a licensing law, which aims only at protecting the health, and morals of the public who are the consumers. That is what the Constitution envisages in any case, the document says. The document also urges government to liberalise entirely the current business environment by removing all monopolies, tax exemptions, commercial loan guarantees as well as other protections given to parastatals up to now.
The SCCI document also addressed the issue of corruption and abuse of power in the government. It urges the Government to make their “eradication” its priority. “In this context, the Judiciary must be reviewed in order that this institution may regain the respect it deserves from the citizens, residents and Bar Association”. The SCCI recommends that Government sets up “a Board of Inquiry with power to require the Attorney General to institute both criminal and civil proceeding” against those who have been proven to have abused their power or committed fraud, while a public official.