Welcome again to the blog! I know that I have started to post at irregular frequencies since some time but let me reassure you : Finding new and interesting topics to discuss on the blog is on my mind all the time. And if you have anything good enough to talk in a blog post, don’t hesitate to get in touch!
Let’s come back to today’s topic now :
While driving home earlier this evening, I was listening to a Radio Plus debate in which the participants and the hosts were talking about issues related to salaries with particular attention to the minimum salary and how this can be improved. Some figures I will try to quote approximately here :
- According to the Statistics Bureau, the minimum salary is currently around Rs 3,000 !!!
- About 100, 000 people live with a total household income of less than Rs 10,000
- The minimum recommended salary should be around Rs 14, 000
That’s simply freaking! Can you imagine people managing with such salaries?
What can be done?
No. Going for hunger strikes or manifesting on the streets won’t solve this problem. Unfortunately, I did not have the opportunity to hear the whole debate but a few of the points brought forward by the participants and the host were :
- Government should help these very low-income families by financing part of the salary to give them a decent life, at least for a minimum salary of Rs 8,000 or by providing help in terms of food and basic needs.
- The help from the government can be retrieved from Corporate Social Responsibility funds or even from the money earned by the government through the loto.
- Better management of government projects to avoid losing billions of rupees and use this money to help the needy ones.
- Basic needs (food etc) should be taxed less as compared to other product and services
- Raise the income taxes and Value Added Tax to grab more money from the ones earning more than others.
I was like… euh. What? More taxes?
I’m no financial expert but I don’t agree with the last point. While I find it a good move on behalf of the government if tax can be reviewed on food as it is already the case for some products, I don’t find it right to implement different taxes depending on salary incomes. It is good to know that there are already different categories in the MRA returns filled yearly. Each of the categories have different “Income exception threshold” beyond which the additional income are taxed. For example, if I’m single (with no dependent) and I earn let’s say Rs300, 000 yearly, then I will be taxed on Rs 25, 000 as per the grid below :
According to the same person, the government should increase those taxes so that it can fund social projects, including helping to provide a minimum salary to the needy ones. Fortunately, another participant argued that the government cannot tax someone because he / she is earning well enough. Different factors such as experience of work and skills learn actually account for the high salary of certain categories of people.
Personally, I think that we are already paying too much taxes and a non-negligible part wasted due to incompetent people at the head of various ministries, governmental institutions and authorities. And no, we cannot use the comparison of Mauritius to other countries as an argument in this debate. The government is already doing loads of things to help the needy ones : Just a few days ago, families were given a home for a monthly fee of around Rs600 during 7 years. But still, some people find that nothing is being done for these people. A house on a small piece of land for Rs50 ,000!
I will conclude on something I read today : A prisoner costs Rs 640 to the government daily and a large majority of the 3000 people condemned last year were unable to pay for their bail, hence imprisoned. A total wastage of the population’s money!
Now, how would you react if the government grabs more of your hard earned through taxes?
I heard the debate this afternoon. Very interesting debate.
I find this a vicious circle and it is very simple, increasing the minimum salary automatically increases cost of production, and automatically prices start to go higher, so then what is the effectiveness of the increase?
Another participant intervened saying that indeed we cannot increase anyone below the min. salary to the new proposed salary, this will have too much impact not only on the person but on the economy in general.
In the last budget there were talking of making Mauritius a high income island, high income doesnt mean people getting rich necessarily..
I do agree with you, we should not pay more taxes for earning more, we are already paying a lot, i contribute hell a lot per month..but for what purpose? This is the question we ought to be asking and getting justified? There is so much wastage going on and govt should take action, and we people should ensure that such is done, but as usual, we are very passive and just like to contribute blindly every month.
VAT need to be different for different product segments, actually i think some products should even be subsidized by increasing VAT on certain other items. But then again, govt makes a lot of money by the contribution of lottotech as someone pointed out, how is this account? do we know the actual figures and how this money is spent?
With regards to the prisoners costing money, maybe we should legislate something like house arrest, i have absolutely no interest in paying for the sejour of our criminals. When you think about it, the low income earners don’t even earn Rs 640/day.
I however need to point out that despite all these contributions which we don’t always like, we still have free healthcare (lots of countries do not have this), free primary and secondary education and subsidised tertiary education, hell we even have free transport (i personally think this is an absurd decision despite having used it in my uni days, which we’ll have to bear for a very very very long time). All these cost a lot of money to us contributors..no wonder we have to pay this much tax..
There is a lot of debating on this subject, and quite frankly, i don’t think those in power would give a damn on the report submitted by the group of Jane Raggoo, i would however like to have a read on that report..donc as we say once more, les chiens aboieront, et la caravane passera..
That free transport was truly a bliss during our university days haha. Thank you very much for sharing your point of view.
It was and maybe still is for the students. But when you look at it from an economic perspective, I doubt this is sustainable. Since the introduction of free transport was purely a political move, I think no government will dare touch this, if not they would be very impopular..
Another factor to bring into the debate is IF Mauritius officially becomes a high-income country it will forfeit receiving certain grants normally received from the EU and other organisations. This in turn could have an impact on government budgets whereby they would need to find the cash elsewhere such as from taxation. In general I find that the country already operates heavily as a welfare state in terms of health, social housing, public transport, pensions. Indeed, you cannot compare this with other countries. Where else can you get a fixed retirement pension at 60 regardless of contributions or career? I doubt, that in years to come, the government will be able to sustain such a retirement pension scheme. Once Mauritius becomes a high-income country there will have to be budget changes in the areas of health and pension whereby contributive schemes will no doubt be created.
FWIW, tax rates in Australia, based on annual salary:
0 – $18,200
$18,201 – $37,000
19c for each $1 over $18,200
$37,001 – $80,000
$3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000
$17,547 plus 37c for each $1 over $80,000
$180,001 and over
$54,547 plus 45c for each $1 over $180,000
From a purely selfish point, of view, a 15% flat rate would be awesome for me personally. However, I understand that things like free healthcare (and I’ve been lucky enough that I haven’t had to use it yet) need to be paid for. I don’t mind that low income households are exempt from contributing. Everybody deserves to at least be able to cover the basics.
Thanks for the info 🙂
Reste australie et pas rentre dans nous probleme
That’s not so nice on your behalf. I believe that Shane has just quoted for general info, without intending to compare with Mauritius.
Mo pas fine passe jugement lor lakel system plis bon. Meme si mo ti donne mo l’opinion, mo l’opinion aussi valide ki pou toi. Meme si mo pas ti ene Mauricien.
50000 for land and home. Mwa pu 2 toise em mo p bisin paie r50000.
Who are those donkeys who proposed to tax differently. We should be taxed equally, no discrimination
Pas rapel ki sane la ti dir sa. I think that the debate can be listened online on the site of the radio. To be confirmed.
Of course we need to compare Mauritius to other countries – it helps put us in context and serves as benchmark.
We could be taxed a low 5% let’s say but if in all other countries people are taxed at 1%, suddenly 5% is not so low anymore.
Mike below said, ” Indeed, you cannot compare this with other countries.” and then immediately goes to compare us with other countries in the very next sentence:
“Where else can you get a fixed retirement pension at 60 regardless of contributions or career?”
Shane joined in with Australia’s rate.
Mike made the very good point that if we become a high-income country, we could lose grants. So we do need to compare us to others.
No one likes to pay taxes and I am no exception.
Having said all this, I’d like to point out that Mauritius is actually one of the very few countries in the world where personal taxation is quite low. We in fact rub shoulders alongside other well-known names such as Switzerland, Bahamas, Monaco and Luxemburg. A Google search will confirm this.
You get what you pay for in taxes, to a certain extent (not looking at wastage here). You can’t have free transport and pay very little tax. The money to make it free has to come from somewhere.
Personally, I think we don’t need any of these gimmicks. Cut out all free or subsidised things and we’ll all pay much less tax and pay for transport out of our own pockets. Why should a pensioner enjoy free transport when that person has worked all his life? Compare this with a young person with a family to feed and just started working. Who has more money?
The only things I believe the state should pay for are education, healthcare and services like defense, policing, judiciary, etc.
Someone who is given a good education and healthcare should have all the chances in life to succeed. If you take drugs, skip school and end up unemployable, it’s your choice. Others should not subsidise your accommodation because they worked hard for themselves.
As someone pointed out here, increasing the min. wage will increase production cost and then suddenly, the new min. wage will no longer be enough. So there will always be people earning less than others. We just have to accept this fact and move on.
Taxation will always be a hot topic.
Very good analysis!
Thanks for sharing your views here!
Giving money away was never a solution and never will be! Like the proverb says “Instead of giving someone a fish daily, teach him how to fish instead”…the point is empowerment of the needy is what is required. It is not uncommon to find those low income families wasting their money on non-essential things like “expensive” smart phone, cigarette, liquor among others…I have seen people earning salaries less than Rs6000 and yet they have a budget for cigarette, taking 2 years loans to get the new samsung galaxy which when they would end up paying, the phone is already outdated…. There are many solutions (both short and long terms) to help them come out of their misery on their “own”.
So, if you earn Rs 300,000 per year, You pay 15% of Rs 25,000 (300,000 – 275,000) i.e. Rs 3750?
The maths is more complex…