IMF delegation concludes assessment of Value Added Tax Regime
September 19, 2022
A delegation from the Fiscal Affairs Department of the International Monetary Fund (IMF), was in Seychelles during the past week, to conduct a comprehensive review of the current Value Added Tax (VAT) regime, being implemented in the country.
The review, was conducted on the request of the government, with the aim of determining whether the VAT regime is the most ‘efficient tax regime’ in place for a small economy as Seychelles.
It is also in line with Minister Naadir Hassan’s 2022 budget speech, in which he said ‘with the assistance of the IMF, we will conduct a review of the implementation of the VAT tax Regime, in order to minimize abuse in the collection of this tax.”
The assessment exercise took into consideration the following matters:
- Suitability of having a VAT regime in countries with a small population and economy, such as Seychelles. Or, would a structure such as GST be a better fit?
- Review of the current VAT regime: Analysis on the implementation of the VAT regime at the moment. Is it working as per the required principles? What areas need to be addressed and improved to ensure its efficient and effective implementation?
- Current IT infrastructure vis a vis efficient VAT implementation: The intention to link up the Point of Sale (POS) systems to Seychelles Revenue Commission (SRC), for real time data capture already exists. Any other shortfalls in terms of the current systems and infrastructure to assist in its implementation
- Review of the zero-rated and VAT exempted Schedules, and
- Guidance with the adoption of the VAT on digital services
The delegation presented a preliminary report on Wednesday 14th September, which was attended by the Minister for Finance, National Planning and Trade, Naadir Hassan, Minister for Investment, Entrepreneurship and Industry, Devika Vidot, Secretary of State, Patrick Payet, representatives of Seychelles Revenue Commission (SRC), and other officials from the Ministry of Finance, National Planning and Trade.
One of the main findings is that VAT has performed as well as it could from a revenue perspective. However, there are risks that this could be eroded if there is continued broadening of the exemptions beyond the strict necessity, given the economic structure of the country.
Furthermore, a return to the GST is unlikely to solve the current discontent with VAT. The Ministry would need to work on a strategy where the shortfalls in the current VAT regime could be reformed.
Minister Hassan, has expressed his appreciation to the IMF delegation for the ‘excellent work done in such a short time, and that more follow up work will have to be undertaken, once the final report is presented.’
The final report is expected in less than two months.
The delegation from IMF, was in the country between Tuesday 06th to Thursday 15th September to conduct the exercise, which included meetings with various stakeholders.
During the exercise, they consulted government and private sector partners, such as: Ministry of Finance, National Planning and Trade, Revenue Commission (SRC), Seychelles Chamber of Commerce and Industry (SCCI), tax agents and accountants, as well as the Praslin and La Digue Business Community.