Sithanen Toohrooh Crosses Trillion-Rupee Threshold

This happened at the end of April. Yep, a trillion rupees of GDP is missing with respect to Dr. bean-counter's forecast of average growth of 8% after mindlessly slashing top tax rates to 15%. That's like our GDP for 2001, 2002, 2003, 2004, 2005 and 2006 combined. 6 years of GDP. Or roughly those of 2011, 2012 and 2013 put together. So it's been a failure of epic proportions. Nothing has hurt Mauritius as much as the Sithanen flat tax. Absolutely nothing. No natural calamity has done this kind of damage. And boy did we have calamities in the last 50-60 years. Because nothing has shaved off more than four percentage points off the target growth rate six years in a row. As a comparison the consolidation we saw in the textile industry -- especially in 2003 and 2004 -- cut down growth by only 2% and that too in only one year. Let us also not forget the extra 22,000 Mauritians that were thrown into poverty over the first five years of the fake reforms. #prayforzanzibar.

One and Twelve Zeroes

1,000,000,000,000 rupees is not exactly the smallest number you'll encounter today. That's 257 times what the sugar industry is expected to contribute to our economy this year. No typos here. Two hundred and fifty seven times. Or if you want about USD29 billion at our seriously depressed exchange rate. That would have bought 3.6% of Apple at recent prices. Or the whole of Uber according to a valuation by NYU's Damodaran.

African Strategy Compromised

Forget the fantasies of people who haven't looked at a map in a long time. We will never be able to deploy the kind of strategy on the African continent and elsewhere we should have aspired to if progressiveness is not brought back to our tax structure on Thursday. A trillion rupees of GDP missing means that the private sector should have produced Rs800 billion more over the last 11 years and our Government an extra Rs200 billion. The flat tax has broken the economy and everything has slowed down. Save the production of rubbish.

The Enormously Costly Facade of the Low-tax Jurisdiction

There was absolutely no reason to slash top tax rates beginning in 2006 as at around 20% of GDP Government revenue was really at a minimum. And that kept our social fabric in good enough shape. The number for France, if I remember correctly, is like three times larger. Nordic countries too have much higher percentages than Mauritius. No wonder they top all surveys of human development. Consistently. It's true our public sector can and must increase the pace of improvement. But that's true of our private sector as well. Besides the reasons put forward by Dr. Calamity for messing up the tax structure are fake.

The only possible explanation for the screw up is to build a facade of a low-tax jurisdiction. We know where he works. It would be interesting if he declared the size of his personal interest in the sector since its inception. It definitely looks like he might have mistaken the offshore sector for the whole financial industry. Which would explain why there were only three little paragraphs for the financial sector in his 2005 ministerial note "Setting the Stage For Robust Growth". And all three were about the offshore sector. It's kind of hard to believe now that was a mistake though.

A Fraction of a Fraction is a Pretty Small Number

The financial sector accounts for a tenth of our national output while the offshore sector is a fraction of that. The latter had revenues of about Rs8 billion and Rs2 billion of profit in 2015. Or the kind of profit SBM Holdings made in the same year. And less than half of what we lost in traffic congestion last year. Contrast this with the Rs26.4 billion of Government revenue missing in 2015 alone based on the 8% growth promised by the toxic bean-counter if we assume Government revenue being a very conservative 15% of the economy. Rs11 billion if our slack Tiger inched along at its typical 5.5% growth rate and the Government weighed 20% of GDP.

Mauritian Voters Shouldn't Pick Up the Tab

One guy breaks the economy with top tax rates that are too low -- with a few others just sitting on their hands -- and some people want retirement to be postponed by five years. How dumb is this? As dumb as 'competitive depreciation' which has caused our economy to be two-and-a-quarter times smaller than it should have been. And kept us out of the group of high-income countries for so long. The flat tax has cost our Government a revenue shortfall of between 150 billion and 200 billion rupees so far -- which is a lot more than the Rs120 billion the NPF/NSF had at the end of 2015! So let's come back to earth on Thursday.

Two Good Things that Can Happen to Us

One is that our rupee appreciates mildly so our management improves and allow us to see clearly the real problems we need to solve as a nation. The other is that the progressiveness of our tax structure is restored to reignite the engines of growth that have been damaged by the dumb flat tax and to curtail the horrendous inequality it has created. This would put us in a better position to face the challenges of today like OBOR with confidence and those which will appear tomorrow. Which leaves Pravind Jugnauth with one last chance to get back to basics on Thursday. Before we vote very carefully again.