Kuma 20 An Unfair Share Contribution Fin Rwin Moris

Li sinp. Ler ti met flat tax 15% Sithanen an 2006 ti sipoze gayn krwasans 8% ar sa (ti gayn krwasans mwayin de 5.1% ant 1968 ek 2005) be kuma tiart la montre nu dernie 4 guvernman zame in resi ariv pre ek sa target la. Nun pas apepre de 5% pu promie guvernman, a 3.8% pu deziem, 3.6% pu trwaziem e 1.7% pu katriem. Sel lane nu fin gayn en krwasans 8% u plis se an 2022 lawsi se akoz lekonomi ti kontrakte par preske 15% an 2020 ek Kovid. Padayachy pran trwa dernie lane so manda e dir nu lekonomi ti an bum, ki en fason rigolo interpret ban sif. StatMu pe prevwar en krwasans 3.1% pu 2025 e sa pa ti pu diferan mem si pa tiena sanzman rezim.

Sa tiart la montre osi ki krwasans pandan 2em e 3em guvernman ti mwins ki lamwatie target donk pa kav blam Kovid pu sa. Overol ant 2006 ek 2024 krwasans mwayin fin selman 3.3% e sa explike kifer nu sosiete pe kontinie dezintegre a vites gran V. Byinsir ban nanti fin byin profite e la pe rod fer grand mazorite Morisyin pey pu sa katastrof la e zot pe fer sa par atak nu leta providans. Ban latak la pu kontinie e vin pli frekan parski en striktir taksasion tro ba e insutenab se en pwazon.

Morisyin Pe Araze Ek Sanzman Pansion Vieyes

Depi ki Ramgoolam in anonse dan so bidze ki pe repus laz elizibilite pansion vieyes (BRP) par 5 an a 65 an lepep Moris lor santie de ger. E avek rezon. Pe dir nu ki li insutenab parski li reprezant 7.8% GDP e sa sif la pu kontinie ogmante. Seki insutenab se flat tax 15% ki Sithanen ti servi pu frir nu lekonomi apartir 2006 ek benediksion Ramgoolam e ki tu guvernman kin vini apre in garde pli u mwin.

Get sa, Sithanen ti dir nu ki ti pu gayn 8% krwasans an mwayen ek so pwazon me anfet nu pan gayn mem lamwatie sa to la lor dernie 19 an – nun gayn zis 3.4% e sa fin koz en mank a gayne de Rs1,200 milyar rupi dan lakes guvernman a lafin 2024. Si nu ti gayn 8% BRP an 2024 ti pu vo zis 3.4% GDP. 5.7% si nu ti gayn krwasans mwayen ki nun gayne depi lindepandans ziska 2005. Dan tiart lao nu montre usi so pwa pu de lot to krwasans.

Seki pli komik ladan se telman flat tax 15% Sithanen fin andomaz nu lekonomi ek nu pei ki Ramgoolam in ogmant to ki ban gro saler peye selman pu trwa an. Apre trwa an ki arive, nu rekumans frir lekonomi e nu re koste ek stati diunk de Moody's?

Solision la li sinp, li gard "fair-share contribution" pu tultan, li elimin ban depans siperfli kuma ranz ankor sime (fin ranz 1,035km sime ant 2006 ek 2022 donk bizin met en poze ar sa) e li inplemant ban bon politik. De tut le fason pena sa ni dan manifest elektoral ni dan program guvernmantal e si li anvi fer sa li bizin swa organiz en referandum u disut parlman pu diman elekter permision.

India in Overtaking Mood, Again

It's now the fourth biggest economy in the world in dollar terms after have said TTFN to Japan. Expect the gentle elephant to overtake Germany around October 2027 and then to take a pause of 36 years before climbing the last the two steps of the podium within a couple of years. China which has already the largest economy in PPP terms should start seeing Uncle Sam in its mirror in 2056 and stay in the top position for nine years. Before Tianzhu reclaims the spot it held during 85% of the last 2,000 years.

One Way Lalit is Different From Mainstream Parties

It doesn’t want to bail out the sugar industry while the LP, MMM and the MSM do. Rezistans ek Alternativ too wants save to this old industry. So who’s right?

How To Calculate The Sithanen Toohrooh

I am writing this following a suggestion to talk a bit more on the infamous Sithanen toohrooh. A good idea given that it is the product of the worse thing that has happened to us after slavery: the Sithanen flat tax. I started posting about the toohrooh almost seven years ago. And I can't think of a better way than to explain how I estimated it. So people can play with the numbers and understand how we've been taken for a destructive ride.

Actually you need very little data to compute the toohrooh: real GDP growth and nominal GDP. That's it. These are in the 2nd and 3rd columns. We'll show the computations for 2006 but bear in mind your numbers may be slightly off because of rounding error. Nominal GDP growth is computed from nominal GDP numbers of adjacent years. For example the 11.52% is obtained from 213,444/191,393. Implied deflator is a measure of inflation and is the ratio of the nominal GDP growth to the real GDP growth. That is we got the 5.61% from 1.1152 / 1.056 – a more precise calculation than simply subtracting real GDP growth from nominal GDP growth.

Growth needed is the robust 8% real growth promised by Sithanen for slashing our already low taxes grossed up by the implied deflator. We have to do this because GDP and government revenue numbers are computed in nominal terms. So far so good? So growth needed for 2006 is 14.06% (1.08 x 1.0561). With the last number we can get the nominal GDP compatible with an 8% real growth rate. This turns out to be 218,295 or 14.06% higher than the 2005 number. This is 4.851 billions more than the actual nominal GDP of 213,444 and it produces close to a billion rupees of revenue shortfall for our government for 2006 alone if we assume a very conservative government revenue to GDP ratio of 20%.

The numbers for the other years are calculated in a similar fashion. And we've added two cumulative columns to show how the size of the toohrooh has been growing for the past 12 years. As you can see the toohrooh closed 2017 at Rs1.2 trillion and will grow by another Rs300bn this year. You will surely realise that the cumulative revenue shortfall at the end of 2015 was already about enough for Mauritius to get herself a heavy metro system not the junk that's bludgeoning the Promenade Roland Armand.

On dit merci qui?

Private Sector Behind by 740 Billion Rupees

Over the last eleven years compared to the average robust growth rate of 8% that was promised when the highest tax brackets were eliminated starting in 2006. The almost three-quarter trillion rupee GDP gap -- the 80% estimate of Business Mauritius times the Sithanen toohrooh -- clearly tells us that our private sector did not create value anywhere near the levels needed to justify the 15% flat tax. That was kind of expected when we consider the stupid ways it was financed and the kind of massively unproductive FDI we've been chasing. Or if we were familiar with the damage done by Reaganomics. We shouldn't also forget that the Sithanen flat tax was implemented on the basis of three alternative facts: the infamous triple external shocks.

You may not fully grasp how big a number 740 billions is. Well that's more than the combined GDP of Mauritius for 2006, 2007 and 2008. More than half of that gap happened on Ramgoolam's watch. That took nine years. It will take Lepep less than three to match that if the finance minister doesn't bring back some sanity to our tax regime. A la Bill Clinton. That's because -- as the above chart shows -- the annual shortfalls have been increasing constantly. Thanks to an impressive string of low growth rates. By our historical standards or what we would have been able to achieve. Had the incompetent Mr. Sithanen not badly messed up our economy. For example had we continued growing at an average of 5.5% with our progressive taxation, healthy savings rate and a slightly improved management the private sector would have generated an extra two hundred billion rupees of GDP over the last decade. Which is roughly the GDP of Mauritius for 2006. Just imagine if that was combined with a stable or slightly appreciating currency. We'd all be very looking forward to Mauritius @50. More on this soon.

How Countries Used PISA to Improve Education

Two Years of Lepep And No Miracle in Sight

As expected. They haven't taken the one decision which would have brought some sanity back: end the trickle-down economics started by Sithanen with the blessing of Ramgoolam. We're not only closing 2016 with the 6th consecutive annual growth rate under 4% -- half of the 8% promised -- and a GDP shortfall of nearly a trillion rupees but the economy was thrown into a recession in dollar terms in 2015. Indeed our economic output in USD contracted by about 10% last year from 12.5 billion to 11.3 billion. The decline was even steeper in the first quarter of 2015 which coincided with the first three months of the return of Basant Roi to the BOM. We knew the guy was obsessed with depreciation: the British Pound was worth an extra Rs23 at the end of his first stint. Now one of his recent statements seem to imply that our currency should be set at a level that allows the weakest of our exporters to break-even.

Many Lepep mams have already vire and are cursing that it's our worst government ever. Which would explain the increasingly large crowds turning out to hear Ramgoolam score some easy points. Can we blame them when a Minister -- who is probably mad that February 1st is a public holiday -- has proposed the following trade-off to us voters: food or sand? Or another one who wants to sell the CWA because he doesn't like its hotline? The trouble is that these toxic dynamics were set in motion by Ramgoolam ten years ago. And there's little he's said during the past two years that makes him a credible alternative to lead the country again.

A Trillion Rupees of GDP Missing, Almost

With respect to the robust growth trajectory that Sithanen's flat tax was supposed to place our economy on. The shortfall was about Rs5 billion in 2006 but has been growing exponentially because we managed only a 4% average growth over the last decade. Add all the shortfalls -- shown in red in the above chart -- together and you get Rs927 billion. That's greater than our GDP for 2006, 2007 and 2008 lumped together by almost Rs200 billion. Or a little more than three times our 2010 domestic production. The cumulative shortfall at the end of 2016 will likely be a tiny bit larger because the growth forecast has been revised downwards.

Of course a smaller but still gigantic toohrooh has helped eject Ramgoolam from power and Parliament in 2014. By the end of this year it would have grown by 72%. A meaner beast that Pravind Jugnauth must absolutely tame tomorrow to avoid political mayhem in a couple of years. At most.

Robust Growth Targets Never Reached

The basis for flattening our tax structure to 15% was average growth rates of 8%. We know it had to be higher than the 5% our economy had been clipping for ages and with higher top tax rates. This makes sense. It's like a business which was previously growing at 5% and had a gross margin of 20% decides to cut that margin to 15% thinking it can grow at 8%. It would go for something like this if it wanted to increase its market share. A predator would of course raise prices after and if it had managed to drive its competitors out of business. For example Amazon.com now has physical stores. 

But as the above chart shows we never got the 8% growth rate in any of the ten years since Sithanen starting promising them. We got only half that rate on average. Which is less than what we were clocking before tax rates were slashed. And it's not because of the Great Recession which lasted only 18 months. As he had argued. In fact the rates we've been clocking for the past six years reflect the low growth path his massive policy blunders -- implemented to finance his tax-cuts -- has put us on.

What Lutchmeenaraidoo Must Do, Fast

Increase top tax rates for individuals and for corporates in the next budget. So energy prices can come down to levels that reflect international conditions. And government can start help the economy humming nicely again. In a sustainable fashion. Smart Cities which are more like glorified IRS will not take us anywhere good. They are like the wrong type of FDI we've been getting since 2005: they don't help our young knowledge workers contribute their skills to push Mauritius forward but only make sure that another whole generation is buried. Alive.

Or Lepep and Vishnu -- who can't seem to tell the difference between a Black Swan and a White one -- stand to lose a lot more than bragging rights about delivering a second 'miracle'. They will inevitably be thrown out of office and voters will finally experience an aha moment when revisiting the 'first' one.

SAJ's Comments on Electoral Reform Refreshing

Rightly calling PR a komeraz. Who wouldn't? After seeing what happened to election results in Rodrigues. It's the same feeling one got when going through the dumb and dangerous Sithanen electoral galimatia: a heap of rubbish that doesn't take more than a couple of minutes to demolish. A bit like his 2005 promise that a flat tax would generate average robust growth rates of 8% forever after: 2015 will be the 5th consecutive year growth rates will be less than half of that.

Besides PR is so unLabour: Phillippe Rozemont was expelled from the Labour Party when he voted in favour of it. And roughly six decades later Navin Ramgoolam lost power and his seat after he flirted with PR. When an overwhelming number of Mauritians -- using an attractive feature of our wonderful FPTP system but one that Sithanen wants to get rid of with party lists -- said no to an electoral proposal that is vote wise and outcome foolish. There is no need to use a bazooka to get rid of a very mild headache.

Refreshing indeed. Reminded me of what another of our PMs said back in May 2010: "Ki zot tile? Pran zot dan godi dir ayo papa Euro! Euro! donn zot bibron? Pa Pwena! Devaliasyon zame tienn solisyon. Nu bizin vinn pli konpetitif".

Four Reasons Top Taxes Are Too Low

One is obviously the low growth rates that Mauritius has clipped for the past few years: indeed 2015 is looking to be the 5th consecutive year that it will be under 4%. I don't think this has ever happened. At least not since independence. I am sure you remember that one bean-counter promised Bretton Woods-inspired robust average growth of 8% back in 2005. Which was the reason the tax structure was flattened.

Two is that tax receipts have literally stayed flat in real terms over the last 12 months. Indeed the MRA disclosed that it collected only 4% more in the last fiscal year. Which roughly matches the increase in the general level of prices. We've alluded to that before.

Three the MCCI said that more than a third of the businesses it surveyed recently are complaining that Government is not doing enough to improve their businesses. Well, with the silly flat tax Government has ensured that it would have less resources -- and the private sector would have more -- to drive the economy. If nothing much has happened and is going to happen Government should raise top taxes to move Mauritius forward. If we don't want to keep on waiting for Godot.

Finally the flat tax has increased inequality tremendously. You just need to compare the number of people thrown into poverty after Navin Ramgoolam's first and second mandate. We can also have a look at how real disposable income has changed for the richest and poorest 10% of our households for the same periods. That's pretty bad for our social fabric and for better economic growth.

There is of course another reason why top taxes should increase.

Vishnu is Lucky, Again

To be Finance Minister these days. After almost a quarter of a century. Because that's after almost 10 years of the worst economic management -- Paglanomics -- our country has seen and started by Rama Sithanen with the help of Bretton Woods Ali. And of course with the blessing of Andrew Scott and one pseudo-socialist, Navin Ramgoolam. So improving things should not be that difficult. For example increasing pensions has helped compensate the lack of reasonable progress that the weakest groups of our fellow countrypersons have registered with the toxic bean-counters. And there are many more low-hanging fruits to pick.

But monetary policy was definitely not one of them. So it was quite surprising that Manou Bheenick was asked to leave. And replaced by depreciation-obsessed Basant Roi. Who unsurprisingly since returning to the BoM less than 80 days ago has presided over a double-digit depreciation -- 12% as of today -- of our national currency against the USD. After our central bank had issued a communique on January 30 informing the nation that there would be no MPC meeting in February because Lutchmeenraidoo's budget was due March 16. Or 45 days later.

Hopefully the Minister of Finance who keeps on insisting that he will deliver a 'second miracle' understands how to assess the quality of economic policies. Computing our real GDP growth in USD for the current quarter might be quite enlightening.

Catastrophic Week-end Turns 35

Between 21 and 23 December of the International Year of the child a pretty little thing called Claudette visited us. Probably because she got jealous that Pele had kicked a few footballs at our George V Stadium a couple of years before. If I remember correctly we celebrated Xmas without electricity as Mauritian power lines didn't offer any major chewing problem for an intense tropical cyclone.

The upshot is that the 3-day visit helped put our economy into a depression: a 10% contraction. 1979 was also the year of the Three Mile Island nuclear accident which was essentially due to a flawed interface design. And of a major switch of how the US Fed carried out monetary policy.

If you plan of drinking in the next few days, don't drive, take a cab or pick one of your friends as a designated driver. Staying alive can be a lot of fun.

Reforms See Poor Make Tiny Progress

Indeed the 10% poorest households saw their real disposable income increase by only 6.2% for the five years ending in 2012. This compares very unfavourably to the huge progress recorded after the first mandate of Navin Ramgoolam as PM -- Bheenick and Bunwaree (BB) were his Finance Ministers. At that time the weakest households of our country saw their purchasing power increase by a very healthy 48.6% -- that's 7.8X the 2012 increase -- over the levels of the preceding half-decade. 

The reforms have been very good for the 10% wealthiest though: their disposable income has surged by almost 30%. Of course the increased inequality has helped Mauritius clock some of the worst growth rates in more than 35 years: 2014 will be the fourth consecutive year with one under 4%. Which is half what was promised to us in 2005. And the basis for the 15% flat tax.

Happy voting!

Navin Ramgoolam Joins Select Club

As the third of our Prime Ministers to also cumulate the Finance portfolio. Of course the first and most famous member of this very exclusive group is SSR who happened to be our FM at the most famous time in our history.

It's a real pity that Navin Ramgoolam did not take over that ministry back in 2005 as I had suggested when it was already kind of obvious to the trained ear that a toxic politician was doing his level best to send the country to the dogs. Especially when you consider that Mauritius not only had the best growth rates of the past twenty years during the first mandate of Ramgoolam II but the cake-cutting was also a lot more compatible with that of an avowed socialist. But it's true that PMs can sometimes, but not always, get busy. Still, he could have entrusted the ministry to a Rs5 coin and the outcomes would have been a lot better. But let's not cry over a spilled decade. And instead watch how he plays the trump card he's been dealt.

15% Flat Tax is Enemy of Good Growth

Bean-counters' answer to their own manufactured lie was a promise of robust growth rates if we reduced taxes by 50%. That -- as expected -- didn't happen. They said well it's because of the financial crisis. Not really, the mess we're in was hatched in Mauritius: our economy didn't rebound in 2010 when the rest of the world did. Besides 57 countries had better growth rates than us in the first three years of the reforms -- which include, by the way, the years of 'early harvest' and 'bumper crop'.

But government has collected more revenue they say. Its revenue can increase if you have higher growth rates, better collections or if you are ripping us off with unreal prices. There has been better collections -- this can happen irrespective of tax rates -- but they did not make up for the shortfall caused by the string of ridiculously low growth rates of the reform vintage. Which is in any case what the PBB circulars have been telling us year after year. One is mostly a one-off thing, the other a cancer that spreads rapidly. You can find that out by recomputing the revenue government collected minus the stupid things (hedging billions, abusive energy prices, making SMS more expensive, high internet prices, wider-than-necessary interest rate spreads, etc). And have a look at the servicing of our debt and its structure for some additional clues that we need to add a couple of higher tax brackets on budget day. Having a good look at recent shutdowns of the US government is also not a bad idea.

And if unemployment has stayed stuck above 10% since the reforms began is it because our people don't have any good skills or is it because there are too many poverty-pay jobs on offer? And because the floodgates of stupidity have been opened? And no, we cannot increase productivity forever in one activity. We need to do other stuff. And use a range of tax rates to make intelligent bets.

Finally if our trade relationship with the rest of the world is unbalanced is it because we're not exporting enough or because we are importing things that we don't really need?

More Proof Crisis is Homemade

Recall that the bean-counters were quick to say that their 'reforms' had produced green shoots followed by an early harvest in 2007 and a bumper crop in 2008. That is easily disproved. They also said something else: that growth rates would have been a lot better had the Great Recession -- which began in 2008 and lasted 18 months -- not happened. And that as soon as conditions will get sunnier in the world things would improve for us because we're one of the world's most open economies. 

But as the above graphic shows, we didn't really rebound when times got better. Unlike the object of our economic fantasies: Singapore. We also know for a fact that a lot of the record poverty that was created has been produced well before 2008. And before Bheenick got appointed as Governor.

We also know what's holding us back.

Understanding Our Recent Budget Deficit Numbers

Did you notice that the bean-counters are crying on every roof that our budget deficit is under control at 1.8%? Presenting it as a proof that the so-called reforms have worked. It's quite easy to disagree with that.

Remember that the silliest idea of the reforms was to slash tax rates by half promising that we will grow faster. We know our economy didn't clip the required higher growth rates. In fact the reforms have ushered in a string of persistently low growth rates. So the small deficit numbers didn't come from better growth rates. We know it did not come from reducing wastage either: we just need to read the audit reports to strike this one out. So where did these low deficit numbers come from?

Well that's easy. By not spending budgeted funds and other essential monies that prevent the country from going to the dogs. And by doing other stupid things like keeping oil pump prices at unreal levels so as to pocket billions more in VAT and making us pay for a strange multi-billion-rupee hedging loss at the STC that seemed to get bigger as the toxic bean-counters got craftier.

Think of it this way: for many years hyenas have been trying to make an easy-going tiger run faster but instead of cutting the fat they’ve been taking out the muscles of Panthera Tigris. For personal consumption. And unsurprisingly this has badly crippled the big cat.