An IMF delegation preliminary report on a review of the Seychelles Value Added Tax Regime (VAT) concluded that VAT has performed as well as it could but there are risks of it being eroded if the broadening of the exemptions beyond the strict necessity continues.
According to a press statement from the finance ministry, the IMF delegation was in Seychelles from September 6-15 to conduct a comprehensive review of the current VAT regime at the government's request.
The aim of the review was to determine whether the VAT regime is the most efficient tax regime in place for a small economy such as Seychelles, an archipelago in the western Indian Ocean.
The review was announced by finance minister Naadir Hassan last year in his 2022 budget address.
"With the assistance of the IMF, we will conduct a review of the implementation of the VAT tax regime, in order to minimise abuse in the collection of this tax," said Hassan.
The assessment looked at the suitability of having a VAT regime in a country with a small population and economy like Seychelles and if a Good and Services Tax (GST) is a better fit.
The IMF report stated that a return to the GST is unlikely to solve the current discontent with VAT and that the finance ministry would need to work on a strategy where the shortfalls in the current VAT regime could be reformed.
The Value Added Tax was introduced in Seychelles in July 2012 and replaced the GST. VAT is a broad-based tax of 15 percent on most goods and services imported, sold and consumed in Seychelles. It is a consumption tax which is paid ultimately by final consumers.
At the presentation of the preliminary report last Wednesday, Hassan expressed his appreciation to the IMF delegation for the "excellent work done in such a short time, and that more follow up work will have to be undertaken, once the final report is presented."
The final report is expected in less than two months.