The antagonism of some hypocrites in the opposition, who are opposing the tourism project at Petite Police (Takamaka) to hit at government irrespective if it weighs more benefits for Seychelles or not, can easily be ignored.
For two main reasons; firstly they couldn’t care less about any development in the country. Then we all know, about their dirty games of boycotting any foreign investment, as a technique to bribe the developers. They would use international organisations in their smear campaign, caring less if they hurt Seychelles.
What have they got to lose, they are not the ones who have the responsibility of this country nor were they ever interested with Seychelles.
But for the true residents of Takamaka, whose opinions matter, they should consider carefully such a tourism development, not just for Petite Police and employment opportunities for some of them, but for the prosperity of the economy, and Seychellois in general who benefits when government gets foreign direct investment to give back to the people, in health care, education, and housing, to name the three.
If Seychelles refuses investments, the developers will go elsewhere, and this is not good. We need these people.
The environment minister explained that it is in the Government’s condition that if it approves the project the environment of the area will not be compromised.
Tourism Minister Alain St. Ange pointed out that the Petite Police Hotel project has been on the cards since 21st August 2006.
“The question is do we need further development to ensure that our country’s economy remains strong. Tourism, it is known and accepted, is the industry that continues to provide employment for our people and that is responsible for wealth creation.
Seychelles needs to work as a country and as a people to get the best hotel development and this is through dialogue when the EIA Meetings take place.
We need to work with the Ministry of Environment and with the Ministry responsible for Land Use and Habitat when the EIA has been done to see a development that will do justice to our country and the process of consultation can and should achieve that”.
The Principal Secretary for Economic Policy and Planning Bertrand Belle explained to ‘The People’ that with an FDI project government will collect more taxes. “We do not have a class of taxes or income that is classified as GoS FDI Income.
However the presence of an FDI project means that there are more taxes collected”, he said. These are in the following forms:
1. Taxes collected on imports directly related to the Project
2. Taxes collected on labour involved directly with the Project
3. Taxes collected on businesses related directly to the Project
4. Taxes collected on imports, labour, businesses giving goods/services to any of the people involved with 1, 2, and 3 above.
5. Taxes collected on the full-time operations of the entity
- Taxes collected on imports directly related to the Project.
During the construction of a project there are a number of items to be imported, and on some of these items, there is Trades Tax to be paid. Items such as tyres, fuel, etc… If a project is being implemented, and they need to import these items, then Government collects some extra taxes. Taxes that can be collected at the point of entry are Excise Tax, VAT, Trades Tax.
Excise Tax is on products such as alcohol, tobacco, fuel and cars.
Trades Tax is on all the above, plus a few more. VAT is on the majority of products.
However, a company which is about to build a hotel will be VAT registered, and get refunded all the VAT that they pay at the point of entry. This refund (which may seem like nonsense) is done on the basis that once operational the hotel will collect VAT on all clients. Say there is a 10 bedroom hotel, which contained SR 6million to build and furnish.
Assume that all of the SR 6m was VAT-able which would mean the VAT paid was SR 900,000 (15% of 6million). The hotel then gets this 900k back, but pays VAT monthly when it rents a room. Assume that the person gets Euro 130 a night, and enjoys 75% occupancy over the year. Assume 1 euro gets you 16 rupees.
This would mean that on a monthly basis, the hotel is collecting 130x16x365x0.75 = SR 569000 (approx.). This means that after two years, the hotel has paid over SR 1m. In 5 years, it has paid SR 2.5m. Therefore, it was worth refunding the SR 900,000 because by letting SR 900,000 go on day one, you can then collect SR 570k annually.
Therefore, since VAT is refunded, and the other taxes are not levied on a huge number of items, this revenue stream is not a very high portion of the total project cost. It is not irrelevant, but it is not huge.
- Taxes collected on labour involved directly with the Project.
Say a project comes online and employs 120 people directly through the contractor. These 120 people came to work because they were either unemployed, or the project they were previously working on was coming to an end. The Government collects Personal Income Tax on these workers, and in the event that each worker earns SR 5,000 a month, then Government collects 120x750x12 = SR 1,080,000.00 for a 12-month project.
- Taxes collected on businesses related directly to the Project.
Businesses that are associated with the project (e.g. marketing, insurance, accountancy, auditing, engineering, architecture, quantity surveyor, etc, etc….) also employ people and have their own taxes to pay, so Government collects taxes through VAT on these companies, personal income tax on their employees, business tax on their profits, etc, etc… All this generates extra tax revenue for the Government.
- Taxes collected on imports, labour, businesses giving goods/services to any of the people involved with 1, 2, and 3 above.
The above only takes into consideration the people directly employed with the project. If you think of the businesses and people that these people then interact with.
For example, say the 120 people employed full-time want to go for a meal, or buy a car, or go to the cinema, or employ a gardener, or send their children to private school, etc, etc… All these are the spin-offs, and with each entity that they engage with, Government collects more revenue.
- Taxes collected on the full-time operations of the entity.
Last but not least, there is the fact that once the hotel is in operation, it generates a lot of income. In the example above, a 10-room hotel can generate half a million a year.
A 100-room hotel charging Euro 250 a night, at 75% occupancy will be generating about SR 10 million a year in VAT alone. It would also employ at least 150 people directly, and even more indirectly.
Other Considerations
Government does not print money or grab it out of thin air to produce projects. Government collects/raises money through taxes. Thus, when we want better conditions in schools, more sophisticated health equipment, cleaner roads, a more extensive road network, more social housing, etc… all this takes money.
It means Government needs more money than we are currently collecting. There are a few ways to do this. You can either increase tax rates (e.g. put PIT at 20% instead of 15% so everyone can take a pay-cut to pay more taxes) or you can increase the number of businesses paying taxes. New hotels are a way of increasing the number of businesses paying taxes.
New businesses also provide a lot more employment and business opportunities for those who wish to take them.
“The main benefits of having these new hotels coming in are that it gives opportunities of employment and growth to the population”, said the PS. Mr. Belle added that “The taxes are almost a secondary benefit. Take a look around the region, and look at the unemployment levels.
Here it is less than 5 percent (say 1,500 to 2,000 people). Of a workforce of about 45,000 there are say 10,000 expats meaning that it should be easy for the 2,000 to seek employment. When your child finishes school, you do not need to worry that she is entering an economy which is stagnant and has very few job opportunities”.
