Climate Tax to Hit Rs 7.9 Billion, Businesses Feel the Heat

The government is projecting a collection of Rs 7.9 Billion in “other taxes” for the fiscal year 2024/25, according to estimates. The Corporate Climate Responsibility (CCR) Levy is expected to contribute Rs 5 Billion towards this amount. The introduction of this levy was announced by the Finance Minister during the budget speech.

The CCR Levy is equivalent to 2% of the profits of companies with a turnover of over Rs 50 million.

According to the Finance Minister, this tax will be used to support national initiatives aimed at protecting, managing, investing, and restoring the country’s natural ecosystem and combating the effects of climate change.

Business Mauritius Supports Climate Tax

Diane Maigrot, Director-General of La Turbine, is supporting the climate tax, stating that it is a necessary measure supported by the business community.

“The fund will be managed jointly by the public and private sectors,” she said.

“This will allow us to have the necessary budget to work together and try to find solutions for the challenges we will face in the future.

We are already in a phase where climate change is impacting the environment directly. We need to rethink our way of thinking and doing things.”

International Organizations Warn of Climate Risks

The International Monetary Fund (IMF) has highlighted the growing risks of climate change, which can disrupt the economy and affect productivity, transportation, and insurance costs.

According to the UN SIDS in Numbers 2017 report, Mauritius is expected to become a water-stressed country by next year.

Concerns Over Inequality

However, some economists have raised concerns about the uniformity of the CCR Levy, arguing that it is unfair to treat all sectors equally.

They suggested that sectors most affected by climate change, such as tourism and insurance, should contribute more.

Businesses Need Clarifications

The Association of Hoteliers and Restaurateurs of Mauritius (AHRIM) has acknowledged that the fund is essential for the country’s tourism industry but has called for clarification on the existing environmental tax and its relationship with the new CCR Levy.

Impact on Businesses

The introduction of the 2% CCR Levy has been described as a surprise by some businesses.

The total tax burden on companies will increase to 19%, including corporate tax and the CCR Levy. There is no indication yet on how global businesses will be affected.

Government’s Agenda

The government is planning to use the revenue generated from this tax to pursue its climate agenda and support national initiatives. It is estimated that not less than Rs 300 billion will be needed for adaptation and mitigation programs.

Tax Impact on State Revenues

The state’s revenues will be influenced by this new tax. The CCR Levy is expected to generate Rs 5 billion, while corporate tax will generate an additional Rs 5 billion due to improved business profits. VAT revenues are also expected to increase by 17% to reach Rs 65 billion.

Concerns Over Deterring Proactive Climate Action

Julien Tyack, Partner and Sustainability Leader at PwC Mauritius, has expressed concerns that the CCR Levy may deter companies from taking proactive measures to address climate change.

However, Business Mauritius believes that with good governance and public-private collaboration, this initiative could produce more significant benefits than the proposed 2% profit levy.

Overall, while the government aims to collect Rs 7.9 million in “other taxes” for 2024/25, there are concerns about the impact of this tax on businesses and its potential effects on climate change mitigation efforts.

Source: Defi Media