Mauritius raises tax rate

Mauritius relies heavily on tourism

Mauritius has raised its value added tax (VAT) rate from 12% to 15%.

The rise was its second since last summer when the rate was 10%.

Mauritius raised its VAT rate in part to fund past spending which has pushed its budget deficit to 6% of its gross domestic product.

The rise should help "reducing the budget deficit to around 3% by the year 2005/06 while, at the same time, investing massively in priority sectors", Finance Minister Paul Berenger said.

Extra earnings

A three percentage points rise in VAT should help the Mauritius government rack up an additional $66m in revenue, analysts have calculated.

Beyond covering past spending, the extra cash is set to be spent on education, information technology, the environment and infrastructure, as well as housing.

Mauritius' economy, which is based on sugar and textiles, as well as tourism, grew by about 5.6% during the year to April.

Local media were critical of the budget.

"This budget provides virtually no incentives to motivate local investment and attract foreign direct investment," observed the newspaper Le Mauricien.

"At a time when unemployment has reached the 10% psychological mark, except for a few incentives for the small and medium enterprises, no immediate and bold steps have been announced in order to curtail the rising trend of this social evil."