Platform Komun Syndikal Fin Ekrir A Ban Parlmanter

Dan en let sinq paz, zot fin explike, sif a lapwi, ki BRP e nu welfer steyt sutenab me seki pa sutenab se sa pwazon de flat tax 15% ki Sithanen ti servi popilasion apartir 2006. Zot fin dir ki rasio BRP/GDP ki fin okip deba piblik dernie 13 mwa pu bese ek en BRP de 100 milyar rupi an 2035 pu tu to krwasans aniel mwayin siperyer a 2.2% ki en to vreman insinifian konsideran potansiel Moris.

PKS fin osi expos dega katastrofik ki flat tax 15% Sithanen in fer a Moris depi 2006 e kuma sa fin fer an sort ki nu lekonomi de fwa edmi pli tipti ki seki li bizin ete an 2026.

PKS fin osi fer plizir propozision pu ogmant reveni guvernman e fin termin let la par dir ki zot ti va prefer ena ban konsiltasion sinser ek guvernman e fer ban parlmanter remarke ki laful dan manifestasion le 11 Ziyet 2026 dan Por-Lwi in fini vot pu en lagrev zeneral.

U kav lir let la isi.

Lepep Pe Desan Lor Sime Pu Ki Ran So BRP

E aret latak lor so leta providans ki anpes 1/3 Morisyin tom dan lamizer. Ena pagli mami ki alor ki nu system lasante pibilk in krash ti dir resaman ki 18.5 milyar rupi ki nu depanse ladan en fardo mari lur. Anfet si ti bizin depans mem pursantaz GDP ki Sesel e nu ti gayn krwasans 8% ki ti sipoze gayne ek flat tax 15% Sithanen be nu ti bizin depans 93.2 milyar rupi u 5X plis.

Nu mark nu prezans Samdi 11 Ziyet, 13h, Sant Sosial Mari Ren de Lape ki truv anfas Lanbasad de Frans, Por-Lwi.

Anu Fak-Tiek Diskur Ramgoolam A Nu Ban Gran Dimun

Sanjay Jagatsingh · Fact-check diskur Navin a nu ban vie dimun

Pope’s Warning Turns One

Francis visited us exactly a year today and celebrated a wonderful mass in honour of Father Laval in Port-Louis. Later in the day he told a gathering of the civil society and the authorities to move away from the idolatrous economy we had been worshipping (understand by this speculative FDI, record inequality, national problems not solved, not enough regard for the environment and a degraded public health system because trickle down economics had made government run out of money).

Twelve months later, how much of this common sense has been heeded?

Why Our Government Hasn’t Been Functioning Properly

Three words. Sithanen flat tax. As it never produced the higher growth rates (8%) our central government has been piling up so much debt – increasing from a total of Rs106bn to Rs278bn between 2005 and 2018 – that it had to resort to creative accounting, push up the debt ceiling several times and has failed to solve many national problems. The USD has also appreciated by one-third against our rupee over the past 15 years. Not a good sign. Definitely not what you’d expect from a Tiger. But pandemics have such a way of bringing back sanity. 

Did Trickle-down Economics Work in Mauritius?

Savings-Killer Misses Elephant in the Room

In April 2017 Sithanen said that the tram express would be a financial disaster because it would fail to cover costs and saddle future generations with debt. This was kind of funny for the bean-counter to say because as the chart shows government has had a revenue shortfall in all the years since 2006 which is the year he implemented his economic snake oil aka flat tax – there’s a flat-tax-related deficit as soon as growth is lower than the promised 8%.

In fact as from 2013 the revenue deficit caused by his regressive tax policies had grown big enough to fully pay for at least one 19-billion-rupee tram every single year – two as from 2016 and three as from last year. So in total there’s enough government money missing over the past fourteen years to pay for at least 10 trams (15 when you add the figures for the first seven years and the sums left over in the other seven).

In the meantime central government budgetary debt has risen by Rs172bn over the same period without any major national problems getting solved. I wonder if future generations will enjoy the terrible mess we’re in as much as we are.

It’s great we’re voting soon. 

Another Pope, Another Mauritius

When he visits us tomorrow, Francis will find a Mauritius that’s very different from the one that greeted the most travelled Pope ever, John Paul II, thirty years ago. As the chart shows we’ve regressed in all but two ways. The cake produced over the four years before Monday’s trip (cake increase) is almost two-and-a-half times smaller, savings have collapsed, rupee has lost more than half of its value, road fatalities over the last four years are about a quarter higher and unemployment two times bigger. Inequality has also increased substantially. More on this later. 

Many of the problems we’re facing can be traced back to the 15% flat tax which has placed public finances in a critical position. Indeed at the end of 2018 there was Rs1.5tn of GDP missing which should have generated Rs300bn of revenue for our government. This would have made the latter debt-free. No wonder then that there’s plenty of signs we’re in big trouble the latest being that more than 50% of the vehicles at our fire stations and pumps don’t work. This shouldn’t be a surprise for Francis who has stated publicly several times that trickle-down doesn’t work. Let’s see what he says while he’s here. 

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. 

What You Can Learn From the Audit Report

In 2014 MT paid Rs671 million as dividends to government. Which means that it paid Rs447 million to FT. That's almost five times the dividend paid by Airports of Mauritius. And close to eight times the one paid by SBM Holdings in the same year. MT dividend paid only Rs221 million in dividends in FY ending June 2016.

One quarter of government revenue came from debt in 2014 -- one fifth by mid-2016. Which explains why the Sithanen toohrooh has gotten so big. As if we needed more proof that the bean-counter has been a financial disaster. Public sector debt (PSD) stood at a quarter trillion rupees at end of June 2015. Two-thirds of the domestic portion of that debt was due by mid 2019. Public Debt Management Act has its own way of computing debt as a share of GDP. PSD increased to Rs275 billion by June 2016. On dit merci qui?

Consolidated Fund has a deficit of Rs52 billion. Hmm, must be the early harvest.

I stopped at page 62 of the report. Here are posts on previous editions. And here's one from Singapore.

2011: The Year in Review (Q3)

July: Audit report confirms PBB is an eyewash. Jugnauth announces second miracle on its way. Minister loses son in accident. Hanoomanjee resigns followed by other MSM Ministers. Ramgoolam gets chance to measure up to the Gods of the Labour Party: do plenty with paper-thin majority. Mauritians experience their excellent constitution one more time.

August: US votes on debt deal hours before going into default. Seetaram crosses floor to give Ramgoolam breathing space. MSM leaves government without delivering new miracle. Mansoor wants Mauritius to pay for bean-counting mess, again. For Paul and Pravind it's still love at first sight. Our Parliament found already too big. Manou re-explains BOM's role to MEXA.

September: IMF confirms bean-counters indulged in Voodoo accounting. Jamaica 100m relay team too strong for world. Universe gets new Miss: Leila. Interest rate spreads hurting our competitiveness. Team-builder extraordinaire turns 111. Debt service to exceed education budget by 40% in 2013. Palestinians rejoice as Abbas requests UN membership. Sugar syndicate unhappy world not frozen.

Read the review for Q1, Q2, Q4.

Understanding Resilience: Part 4

To maintain or improve the lot of as many people as possible you need a progressive taxation system and some growth. If you lower taxes by too much the finances of the government will become overdependent on the realisation of higher growth rates. As we've seen happen with the policies put in place by the toxic bean-counting duet.

This cannot make Mauritius more resilient for sure.

US To Vote on Debt Deal Hours Before Going into Default

The vote is due anytime now. But the intriguing possibility of Uncle Sam defaulting has eroded, albeit slightly, the safe haven status of American T-bills.

Make sure to check the interesting interactive graphic of the New York Times to find out how US debt progressed under different administrations. The Economist summed it as essentially the product of two tax-cuts, two wars and one stimulus package.

Mansoor Circular Misleading Nation

In it the Financial Secretary (FS) is saying that he was expecting our economy to ride on the coattails of a rebounding world economy. That of course made sense to him and to his university buddy as they had been attributing some of the worst growth rates in decades our country has clipped to unfavourable international factors only. Now that the world economy is growing faster than Mauritius Mr. Mansoor has had to come up with a new set of external culprits to justify a fresh round of unnecessary budgetary cuts. So as not to look too silly.

But the above equation reminds us that the FS is not telling the whole story. Indeed the amount of money our government collects depends not only on the size of the economy (GDP) -- and therefore indirectly on its growth dynamics -- but also on the average tax rate. Flattening our progressive taxation system to 15% besides creating a lot of social injustice crucially depended on the arrival of higher growth rates if we didn't want to end up with the worst of both worlds: more debt and getting nothing much accomplished.

We never got the required robust growth rates. We know we couldn't. We only contracted more debt and our problems in 2010 are worse than what they were 5 years earlier.

Flat Tax Spins Public Finances Out of Control

That's because the robust growth rates that were needed to sustain the 15% flat tax of Dr. KonnTu and his Bretton-Woods-minted charge nurse never arrived. See, as fiscal receipts depend on growth rates and effective tax rates you can only slash the latter if the former are much higher. Otherwise there won't be any money to solve important national problems or debt levels will spin out of control. A flat-tax also brutally increases the divide between the haves and have-nots.

Unsurprisingly Ministers of the last government have said in private that they were consistently told that there was no money to do anything right from the beginning. So nothing much was done and Mauritius in 2010 is a less competitive place than it was back in July 2005. People have also become poorer and many have lost faith in the future of their country and in their own.

Given that Mauritius will not see any robust growth rates anytime soon matters will get worse and beyond any political repair. Which is why Pravind Jugnauth has to present a new budget. Right away.

High VAT Rate Financing Inequality

Recall that the VAT rate was increased from 10% to 15% to finance the construction of quite a bit of public infrastructure. In contrast we didn't see anything on that scale since July 2005. Technically speaking then, government could have brought it back to 10%. If that had happened the debt-to-GDP ratio would have risen  to 57.72% as shown above. That's a little bit higher than where it was when Ramgoolam set off to Put People First.

Where did that 161.623 billion-rupee debt number come from? Simple. VAT receipts have amounted to about Rs17 billion per year over the last 4.5 years or if you prefer a total of Rs76.5 billion. One-third of that (5% is one-third of 15%) is Rs25.5 billion. Given that the last percentages of the VAT rate don't bring in as much as the first ones I chopped Rs5.5 billion off to get the round number of Rs20 billion. I then lumped it with the estimate from the Ministry of Finance.

Yeah, I guess you could call that reverse Robin Hood.

Government Debt 101

Debt-to-GDP ratio of the central government (that doesn't include parastatal debt) is down by about 8.5% since its 2005 level. That's roughly where it was in 2000. How could that have happened given that the economy grew by about the same speed throughout the last decade (4.33%)?

Simple. Headline GDP numbers are calculated in real rupees -- after taking inflation into account -- while debt-to-GDP numbers involve nominal amounts. The trick is to make sure that the denominator increases faster than the numerator. For example nominal GDP has increased annually by 10.59% on average between 2005 and 2009 while debt has increased by only 6.26%. The corresponding numbers for Federation 2 are respectively 9.03% and 13.24% which would explain why the ratio went up.

Why did government debt increase at a slower rate during the last 4.5 years? We've covered that already. How important has been to lower the ratio? The answer to this question is another question: how has your life changed in the last 4.5 years?

Why The Debt-to-GDP Ratio Has Fallen

For sure it didn't happen by reducing wastage levels. Nope. That we know from reading the damning government audit report year after year. Instead, the Finance Minister did it mostly by never spending many of the billions he had budgeted over the last 4.5 years in typical bean-counting tradition:

1. The Empowerment fund has spent only Rs800 million over a 3-year period instead of the 1-billion-rupees-a-year pledge. That's Rs2.2 billion 'saved'.

2. By making us pay Rs3 billion for an apparent hedging mess at the STC through much higher pump prices than would warrant prevailing oil market prices.

3. Announcing 6 Rs1-billion funds in the June 2008 budget (Food security fund, Human Resource, Knowledge and Arts fund, MID fund, etc) but spending only a small fraction of them.

4. Not spending enough of the last 4-5 capital budgets.

5. Repackaging paragraph 271 as an additional stimulus package and setting aside a few more billions which were never to be spent.

6. VAT of 15% was kept on oil prices throughout the period they went all the way to USD147 a barrel. For instance VAT receipts on oil prices doubled from Rs1.65 billion to Rs3.3 billion in 12 short months from 2006 to 2007.

7. Depreciating our currency.