Une nécessaire réforme de notre système politique: A Note

I have a few comments with respect to the points made in this article which appeared today.

1. We are prisoners of the two-party system that the FPTP generates. We don't have a two-party system here but most elections have been dominated by two alliances each made up of two or more parties. Our political system has been quite dynamic if we look at the weights of the different parties on the political chessboard over time and in the different alliances at voting time. It has also been renewing itself. Maybe not at the speed we would have wished though.

In fact the problems we're having have more to do with a serious degrading of policy-making than with some imagined flaws of the FPTP. The latter is an excellent system that needs a little tweaking. We definitely don't want what happened in Rodrigues with its PR system. At any rate. More on this soon.

2. We've seen many reports on electoral reform throughout the years. A handful at most as far as I can remember. Besides we haven't seen a lot of good ideas. That come close to the quality of our FPTP system.

Lepep Budget May Miss Boat, Again

Budget Doesn't Address Dominant Issue

Namely the extensive damage caused by the flat tax: 1. a massive GDP gap; 2. a serious impairment of our domestic savings; 3. making Mauritius less competitive and dynamic by keeping local pump prices at unreal levels and 4. generating the smallest increase in real disposable income for the poorest 20% of households of the last twenty-five years. Besides the flat tax was implemented on the basis of spurious claims.

A Trillion Rupees of GDP Missing, Almost

The idea behind the flat tax if you recall was that robust growth would follow the slashing of top tax rates. But as our economy didn't grow at the required 8% in any of the last eleven years Mauritius has sustained a growing GDP shortfall for every single one of them. Adding them together yields the astronomical total of Rs927 billion by the end of 2016 as shown in Chart 1. 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 domestic production for 2010. We will be hitting a trillion rupee next year if some very basic common sense does not find its way into the forthcoming Finance Act.

Government Ended Up Doing a Lot Less

Of course the massive GDP gap has translated into a revenue shortfall for our government. The exact size of the shortfall can be estimated using government revenue expressed as a fraction of GDP. That has been around 20%. We need to adjust that number downwards given that the whole purpose of the flat tax was to lower tax rates for corporates and the rich in exchange for higher growth rates. If we assume that the plan was to reduce that share to 15% we're looking at a cumulative shortfall of Rs139 billion. The actual number is larger if the shift from 20% to 15% is done gradually. Now Rs139 billion is quite an interesting number. It's close to the increase in government debt over the same period: Rs129 billion.