OECD Tax Policy Reviews: Seychelles 2020

Description

- Foreword - Executive summary - Main findings - Setting the scene for tax reform in Slovenia - Labour market, social policy and tax policy related challenges in Slovenia - Tackling the challenges to finance the social security system - Strengthening the design of the personal income tax - Improving the design of indirect taxes - Strengthening the taxation of capital income at the individual level - Methodology Foreword Executive summary Notes 1 Overview of key economic and tax challenges Macroeconomic performance Challenges ahead Seychelles will need to innovate and diversify its economy Despite significant efforts, public debt levels remain relatively high Seychelles is vulnerable to climate change and other environmental risks Seychelles will have to adapt its policies to population ageing Addressing the informal economy remains a significant challenge Poverty levels are relatively low but inequality is high Seychelles’ tax-to-GDP ratio The composition of Seychelles’ tax revenues References Notes 2 Broadening the business tax base and aligning tax rates across sectors Assessment of the current business tax system Business tax accounts for a significant share of tax revenues in Seychelles However, the business tax burden is highly concentrated on a small number of businesses and sectors Statutory tax rates vary significantly across sectors A large share of corporations report a zero tax liability Taxable income is very often reduced to negative values because of large tax deductions The differing statutory rates and tax base provisions across sectors explain the wide variations in businesses’ backward-looking effective tax rates Forward-looking ETRs capture information on tax rates and bases within a comparable framework Redesigning the business tax The OECD’s business tax reform proposals largely aim at rebalancing the business tax burden Seychelles could consider introducing a progressive business tax rate schedule unified across sectors other than high-end sectors International trade zones Seychelles’ International Trade Zone regime is very generous and should be phased out or scaled back International corporate tax base protection measures Seychelles needs to make further progress on addressing Base Erosion and Profit Shifting (BEPS) Sole traders and partnerships The presumptive tax The design of the presumptive tax could be revised depending on the objectives it aims to achieve The corporate social responsibility tax and the tourism marketing tax The CSRT and the TMT have been introduced to compensate for weaknesses in the business tax system, but they are distortive Tax administration References Notes 3 Improving the design of non-business taxes The value-added tax Seychelles introduced a value-added tax in 2013 Seychelles’ VAT system is relatively broad-based The VAT registration threshold is comparatively high Some businesses have reported VAT related cash-flow difficulties Informality and VAT fraud remain a challenge Existing VAT rules are not adapted to increasing digitalisation and online sales Environmentally related taxes Personal income taxes A major reform was introduced in 2018, making the personal income tax progressive, but the new system poses problems Seychelles operates a final monthly PIT withholding The PIT base is narrowed by a number of exemptions Personal investment income is generally not taxed in Seychelles Seychelles has made significant progress on international tax transparency Social security contributions Property taxes References Notes Blank Page Annex A. Additional tables and graphs