Implementation of Budgetary Measures, Key Achievements in 2014 and Plans for FY 2015/16

1. Implementation of Budgetary Measures, Key Achievements in 2014 and Plans for FY 2015/16 By M. S. Lal Director-General Mauritius Revenue Authority 1 July 2015

2. Contents Finance Act 2015 Income Tax Value Added Tax Small Enterprises Penalties, Interest, Objections & Appeals Tax Assessments Customs Measures MRA Performance in 2014 Plans for FY 2015/16

3. Income Tax (Individuals) - Income Year Jan-Jun 2015 i.e.. six months Tax Returns due at latest by 30 September 2015 Extension of due date to 15 October 2015 for e-filers, provided any additional tax is also paid electronically Income Exemption Thresholds will be as follows: Category A – Rs 137,500 (no dependent) Category B – Rs 192,500 (One dependent) Category C – Rs 222,500 (Two dependents) Category D – Rs 242,500 (Three dependents) Category E – Rs 162,500 (Retired/Disabled Person – No dependent) Category F – Rs 217,500 (Retired/Disabled Person -1 dependent) Finance Act 2015 – Income Tax

4. Income Tax (Individuals) - Income Year Jan-Jun 2015 i.e. six months Deduction for dependent following undergraduate course – Rs 40,000 for each dependent (local) and Rs 62,500 (overseas) Interest on Housing Loans – Ceiling of Rs 60,000 Deduction for Health Insurance Premium –Rs 6,000 (self), Rs 6,000 (1st dependent), Rs 3,000 (2nd dependent) and Rs 3,000 (3rd dependent) Finance Act 2015 – Income Tax

5. Income Tax (Individuals) - Income Year Jul 15-Jun 16 New Income Year starting 1 July 2015 and ending 30 June 2016 Employees Declaration Form: MRA Communiqué already issued. Forms available on MRA Website and at MRA premises Income Exemption Thresholds (IET): All IET for FY 2015/16 have been increased by Rs 10,000 compared to FY 2014 Deduction for dependent following undergraduate course: increased from Rs 80,000 for each dependent (local) and Rs 125,000 (overseas) to a flat Rs 135,000 for each dependent Finance Act 2015 – Income Tax

6. Income Tax (Individuals) - Income Year Jul 15-Jun 16 No. of years for claiming the above deduction increased from 3 to 6 years Interest Relief on Housing Loans – Ceiling of Rs 120,000 abolished Deduction for Health Insurance Premium – Remains at Rs 12,000 (self), Rs 12,000 (1st dependent), Rs 6,000 (2nd dependent) and Rs 6,000 (3rd dependent) Solar Energy Investment Allowance: Investment in solar energy unit including photovoltaic kits and battery for storage of electricity can be deducted from net income Finance Act 2015 – Income Tax

7. Companies Companies with June accounting year end may submit their income tax return in January (i.e. 7 months later) as compared to December (currently).Similarly, quarterly Advance Payment of Tax (APS) due in December may be paid in January. Quarterly Advance Payment of Tax under APS no longer applicable to companies with turnover of less than Rs 10 million (formerly Rs 4 million) Tax Deduction at Source (TDS): Requirement to deduct tax and remit to MRA not applicable to companies with annual turnover of less than Rs 6 million Finance Act 2015 – Income Tax

8. Companies Corporate Social Responsibility: Details of CSR projects to be included in Annex to Income Tax Return. Return of Information to the MRA: Large Companies (turnover >Rs 100m) to submit statement giving details of payments to suppliers exceeding Rs 100,000 Notice to Employers on PAYE and EDF for FY 2015/16 issued by the MRA on 16 June 2015 Finance Act 2015 – Income Tax

9. VAT Deregistration: Turnover threshold for registration under VAT Act has been increased from Rs 4 million to Rs 6 million Special Deregistration Help Desk set up at the MRA to assist those taxpayers who wish to deregister MRA has issued a Communiqué detailing the procedures for VAT Deregistration Levy on SMS (10 cents): Removed VAT deducted at source by Public Sector Agencies (PSA) A deduction of 4.5% (construction) or 7.5%(others) to be applied by PSA Measure aims at tackling non-declaration of tax by VAT registered persons recipient of contracts by PSA Finance Act 2015 – VAT

10. Special benefits to small enterprises under Revenue Acts: SME One – Stop Shop Scheme under SMEDA Act Eight years exemption for payment of tax by a small company registered with SMEDA after 2 June 2015 Exemption from requirements to deduct tax at source and remit to MRA (except PAYE) for a small company registered with SMEDA after 2 June 2015 - Finance Act 2015 – Small Enterprises

11. Special benefits to small enterprises under Revenue Acts: Small Enterprises with annual turnover less than Rs 10 million Penalty of 2% (instead of 5%) for late payment of tax Maximum penalty of Rs 5,000 for late submission of return instead of Rs 20,000 Simplified income tax system on cash basis instead of accrual basis Simplified VAT annual accounting system using (i) cash basis or (ii) accruals basis Simplified record keeping requirements under above systems - Finance Act 2015 – Small Enterprises

12. Initiatives by MRA to support Small Enterprises Setting up of dedicated Small Business Unit –focal point for all SE Taxpayers’ pack for all new taxpayers starting businesses (being finalised) Advisory visits to facilitate SE to put in place required system Follow up visits following assistance programmes to ensure proper tax compliance MRA Officers posted at SME One-Stop-Shop to provide support in terms of procedures under Revenue Laws Deferred payment scheme - compliant SMEs and VAT Taxpayers Customs duties, excise duties and VAT at importation payable within 7 days after the end of the month during which the goods were cleared at Customs Finance Act 2015 – Small Enterprises

13. Interest on unpaid tax and duties reduced from 1% to 0.5% However, interest on unpaid tax remains at 1% in three cases where the person is only a collector of the tax (i.e. VAT paid by customers, PAYE paid by salary earners, TDS on specified payments) Lower penalty rates for Small Enterprises (previous slides) Payment of only 10% of amount of tax claimed (instead of 30%) before filing an objection to a tax assessment Finance Act 2015 – Penalties, Interest, Objections & Appeals

14. The time limit for the MRA to raise assessments reduced from 4 years to 3 years Fraud cases - authorisation of the Independent Tax Panel of the Assessment Review Committee required where the MRA intends to request for information or raise assessments beyond 3 years All tax assessments or claims issued by the MRA will specify: The amount of deduction disallowed and the reasons thereof The basis for the computation of the amount and its justification; and The reason for making the assessment or claim The MRA will issue Statements of Practice where it is using discretionary powers under the Revenue Laws Finance Act 2015 – Tax Assessments

15. Trade Facilitation Measures Deferred payment facility - SMEs and VAT registered persons Excise manufacturers – requirement to furnish bank guarantee removed – only a security in the form of a bond would suffice Automation of the bonded warehousing process – to facilitate trade, reduce cost and optimise the use of risk management Tracking counterfeit goods – MRA can suspend on its own initiative clearance of goods suspected to be counterfeit for 3 working days Finance Act 2015 – Customs Measures

16. MRA Performance in 2014 – Revenue Collections

17. MRA Performance in 2014 – Tax Assessments (Number: 2,522) (Number: 3,178)

18. MRA Performance in 2014 – Intelligence & Investigations

19. MRA Performance in 2014 – Debt Collections

20. MRA Performance in 2014 –Refunds & Repayment

21. MRA Performance in 2014 – New taxpayers Registered

22. MRA Performance in 2014 – E-filing and E-payment E-filing Rate by individual income taxpayers increased to 95% in AY 2015

23. MRA Performance in 2014 – E-filing and E-payment

24. Set up in January 2013. Comprises of taxpayers with net income exceeding Rs 15 million annually or holding assets of at least Rs 50 million. Unit focused in identifying High Net Worth Individuals using internal & external data. This is an ongoing process as we build our HNWI database. No of HNWIs as at 31 December 2014: 158 with 71 new registration during the year. No of cases audited:40 18 assessments raised with a total tax yield of Rs 58.6 million MRA Performance in 2014 – High Net Worth Individual Unit

25. Set up in January 2013 to systematically identify, assess and rank tax risk. 284 cases of mismatch between tax returns and third party information referred for audit. Identification of 1,545 cases having overclaimed expenses in personal tax returns 686 taxpayers operating TDS/PAYE and not remitting amount withheld to MRA. Analysis of VAT Lucky Draw Scheme (VLDS) entries: (a) 20 non-filers detected (b) 15 cases referred for full tax audit MRA Performance in 2014 – Tax Risk Management Unit

26. MRA Performance in 2014 – Enforcement Action by MRA Customs

27. MRA Performance in 2014 – Tax Audits in the restaurant sector • Total VAT registered entities:640 • Visits conducted in 108 cases • Types of irregularities found in 50 cases (46%) • Prima facie cases of sales suppression • Discrepancies found on the basis of VAT lottery • Failure to issue invoices • Manipulation of sales records • Understatement of purchases to reflect reasonable mark up

28. MRA Performance in 2014 – Tax Audits - Prima facie sales suppression Sample of Cases - Restaurant Sample of Case - Supermarket

29. MRA Performance in 2014 – Using VAT Lottery to track tax evasion Invoice No. does not appear Source: VAT Lucky Draw Entries Extract of Sales listing for Restaurant - March 2014 TP agreed to pay additional tax

30. MRA Performance in 2014 – Fiscal Investigation Cases PONZI SCHEME • Assessments of Rs 25 million on 2 company’s directors • 4 companies subject to investigation and assessments for an amount of Rs 84 M raised Disco House – Income Tax (IT) assessments of Rs11 M – loss declared in IT returns. VAT assessed was Rs 10.5 M (VAT declared: Rs 4.6 M) Printing Company – Tax assessments of Rs13 M – tax declared in IT & VAT returns was only Rs 15,488. Construction Company – Assessments of Rs 21.5 M raised – tax declared in returns was Rs 1.7 M Warehousing/Logistics– Assessments of Rs 10.3 M as compared to tax declared of Rs 4.2 M in returns Property Development- VAT Assessments of 31.5 M compared to only Rs 1.5 M declared in VAT return

31. Revisiting our approach to Tax Compliance Reducing the focus on “post-audit & assessment” and adopting a “Right from the Start (RTS)” approach RTS approach built on 4 pillars: Acting in real time and upfront, i.e.., before return is filed Focusing on end to end processes from a taxpayer viewpoint (e.g. building customers understanding, prescribing book keeping requirements, etc.) Our Plans for FY 2015/16

32. Make it easy to comply and difficult not to: review any internal process, procedures, system interfaces; develop & expand online facilities for filing & education purposes; provide support throughout lifecycle through tailored education, information & guidance to taxpayers or relevant third parties (book keepers, accountants) Actively involving & engaging taxpayers of other stakeholders: co-operation of taxpayers/stakeholders to improve procedures, systems, interfaces; identify & explore opportunities for influencing taxpayers through third parties Our Plans for FY 2015/16

33. Introducing Electronic Fiscal Devices in a phased manner in restaurants & supermarkets to: Record sales & issue fiscal receipts Hold in a secure way financial data Upload data to the server of the MRA using GPRS The key objectives of introducing EFDs are: Enhancing voluntary compliance and increasing revenue collection Reinforcing record keeping obligation Boosting efficiency in the conduct of audits Our Plans for FY 2015/16

34. Enhancing Trade/Taxpayer Facilitation E-registration at Customs – electronic submission of docs & approval E-objections to assessments and e-payment for objections Setting up of Taxpayer Portal to file return & make payment electronically and view tax balance online E-auction system for abandoned goods Automatic income tax refund mechanism for faster refunds Taxpayer Satisfaction Survey to improve quality of services VAT sensitization – preparation of pamphlets for traders on their obligations and consequences of failing to their obligations Implementing the Expeditious Dispute Resolution of Tax Scheme Our Plans for FY 2015/16

35. Enforcement Action to track tax evaders Extension of the work of Special Measures Unit (SMU) to supermarkets while keeping hospitality in focus Field inspection to checkmate issuance of VAT receipts by VAT registered persons Using data received from VLDS to monitor tax compliance of VAT registered persons Short visits for record keeping ascertainment and risk detection in the taxpayer population, including non-filers Continuation of audits of operators in the gambling industry Our Plans for FY 2015/16

36. Analysis of data for Policy Holders of Super Cash Back Gold to identify potential tax evasion cases – already started 54 persons have invested over Rs 20 million each for a total amount of Rs 2.1 billion 154 persons have invested between Rs 10-20 million each for Rs 2 billion Our Plans for FY 2015/16

37. Thank You