OECD Tax Policy Reviews: Seychelles 2020

Foreword
Executive summary
	Notes
1 Overview of key economic and tax challenges
	Macroeconomic performance
	Challenges ahead
		Seychelles will need to innovate and diversify its economy
		Despite significant efforts, public debt levels remain relatively high
		Seychelles is vulnerable to climate change and other environmental risks
		Seychelles will have to adapt its policies to population ageing
		Addressing the informal economy remains a significant challenge
		Poverty levels are relatively low but inequality is high
	Seychelles’ tax-to-GDP ratio
	The composition of Seychelles’ tax revenues
	References
	Notes
2 Broadening the business tax base and aligning tax rates across sectors
	Assessment of the current business tax system
		Business tax accounts for a significant share of tax revenues in Seychelles
		However, the business tax burden is highly concentrated on a small number of businesses and sectors
		Statutory tax rates vary significantly across sectors
		A large share of corporations report a zero tax liability
		Taxable income is very often reduced to negative values because of large tax deductions
		The differing statutory rates and tax base provisions across sectors explain the wide variations in businesses’ backward-looking effective tax rates
		Forward-looking ETRs capture information on tax rates and bases within a comparable framework
	Redesigning the business tax
		The OECD’s business tax reform proposals largely aim at rebalancing the business tax burden
		Seychelles could consider introducing a progressive business tax rate schedule unified across sectors other than high-end sectors
	International trade zones
		Seychelles’ International Trade Zone regime is very generous and should be phased out or scaled back
	International corporate tax base protection measures
		Seychelles needs to make further progress on addressing Base Erosion and Profit Shifting (BEPS)
	Sole traders and partnerships
	The presumptive tax
		The design of the presumptive tax could be revised depending on the objectives it aims to achieve
	The corporate social responsibility tax and the tourism marketing tax
		The CSRT and the TMT have been introduced to compensate for weaknesses in the business tax system, but they are distortive
	Tax administration
	References
	Notes
3 Improving the design of non-business taxes
	The value-added tax
		Seychelles introduced a value-added tax in 2013
		Seychelles’ VAT system is relatively broad-based
		The VAT registration threshold is comparatively high
		Some businesses have reported VAT related cash-flow difficulties
		Informality and VAT fraud remain a challenge
		Existing VAT rules are not adapted to increasing digitalisation and online sales
	Environmentally related taxes
	Personal income taxes
		A major reform was introduced in 2018, making the personal income tax progressive, but the new system poses problems
		Seychelles operates a final monthly PIT withholding
		The PIT base is narrowed by a number of exemptions
		Personal investment income is generally not taxed in Seychelles
		Seychelles has made significant progress on international tax transparency
	Social security contributions
	Property taxes
	References
	Notes
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Annex A. Additional tables and graphs