Putting the Flat Tax Mess in Perspective

Let us assume that we halve the average 8% growth rate target in 2008 and we reduce it by three quarters in 2009 to account for the Great Financial Recession. That’s a pretty conservative assumption because an average growth rate takes into consideration years that are below average. Let us also assume that the government revenue shortfall generated by the Sithanen flat tax for each year — you’ll have one for any given year if the actual growth rate is less than 8% — is reinvested at a rate equal to the rate of inflation until the end of 2015. Again this is a fairly conservative assumption. 

Then at the end of 2015 the reinvested cumulative government revenue shortfall (RCRS) would have ballooned to Rs114bn. That’s 95% the size of the National Pension Fund at the time. Basically another NPF which would have allowed higher benefits to be paid or from an earlier age or some combination of the two. That would have been concrete proof of an ‘early harvest’ or a ‘bumper crop’. But that’s not the situation we’ve been in. Instead government has been trying for many years to target pension benefits. Rs114bn is also about 70% of the cost of a mass rapid transit (MRT) aka heavy metro system. We don’t need this system for now just like the Lepep tram but we would have been able to afford one. Rs114bn is almost half of our public debt at the end of 2015. This would have given us a better credit rating or at least a more favourable credit outlook. Rs114bn is also exactly six times the cost of changing all the leaking pipes of the CWA. 

But this was in 2015 and given that the Lepep government has maintained the regressive policies and added a few of its own the shortfall has kept on increasing and compounding. Three years later it had exceeded Rs300bn. 

Five Key Ingredients For a Vibrant Democracy

1. First-past-the-post (FPTP) system to have strong and stable governments that form fast after general elections and don’t collapse after partner(s) leave winning alliance. Temporary lopsided results we got a few times can be mitigated with prudent tweak without making bloated Parliament bigger or suppressing dissent with stupid anti-defection legislation. 

2. Progressive taxation (PT) and top tax rates at the right level (35%) instead of a ruinous flat tax (FT) of 15% for better economic growth and distribution after savings culture resuscitated, good drains, 24/7 water, halving of road fatalities fast, preservation of our world-famous views and harmony and respect of nature.

3. Recall elections (RE) to get rid of incompetent politicians within months and not five years. Cheap. Only Rs30m. The cost of a by-election. Expect better behaviour after we use it a couple of times. Think of it as excellent meksin laryaz. 

4. Statute referendums (SR) to reverse toxic policies or anti-patriotic ones and to get rid of Presidents. Relatively cheap. Rs300m. Would have prevented Rs300bn government revenue shortfall and GDP gap of Rs1.5tn at the end of 2018. And tense celebrations of Mauritius@50.  

5. Initiated constitutional amendment (ICA) to get rid of the BLS, allow kreol in our Parliament, prevent holders of constitutional posts from leaving with hefty benefits in all cases and impose term limits on PM and other important posts.

Second ingredient will allow us to resume a much better development path like between 1968 and 2005. Ingredients three and four will improve the situation further and will be infinitely better than what we’ve experienced after ultra liberal policies were implemented thirteen years ago. Their combined use may make ICA redundant as common sense would have made an interesting return. 

Berenger (PB), Ramgoolam (NR), Jugnauth (PJ), Sithanen (RS), Subron (AS) and Boolell want proportional representation (PR) to push us into an autocracy. That’s a situation where they implement toxic policies and it’s a lot harder to keep them out of parliament. But it’s wonderful for political dynasties. We don’t want this.