Will employees really get a minimum wage of Rs 15,000 or will they only get Rs 12,750 due to taxes?

Team: Georges Aurore, Chocalingum Komagal, Permalloo Suhaasinee

Article analyzed for fact checking: https://defimedia.info/revenu-minimum-garanti-de-rs-15-000-confusion-chez-les-employes-ouf-de-soulagement-pour-les-entrepreneurs

The Budget 2023-2024 was announced on the 2^nd June 2023 and the Minister of Finance, Economic Planning and Development, Mr Renganaden Padayachy announced that employees will now have a minimum salary of Rs 15, 000. 

On the 4^th June 2023, Defimedia published an article entitled: “Revenu minimum garanti de Rs 15,000 : confusion chez les employés, ouf de soulagement pour les entrepreneurs” (Guaranteed minimum income of Rs 15,000: confusion among employees, relief for entrepreneurs) which includes a statement from a union negotiator about the rise of inflation and, more specifically that the government would get money from the basic salary of Rs 15,000 of employees.

Claims:

“De son côté, Ivor Tan Yan…. Sur les Rs 15 000 qu’ils auront, environ Rs 2 250 au minimum retourneront dans les caisses de l’État”

Translation:

“For his part, Ivor Tan Yan.. Of the Rs 15,000 they will get, at least Rs 2,250 will go back into the state funds”.

Tax is a compulsory payment or charge that is collected by the government from its citizens to cover the expenses of government services, commodities and activities. It is a major contributor to what is called ‘public funding’. In Mauritius, the Personal Income Tax rate is regulated by the Mauritius Revenue Authority (MRA). 

As per the MRA website, ‘the Income Tax is governed by the Income Tax Act 1995 and the Income Tax Regulations 1996’. Personal Income Tax rate revenues are a significant source of income for the Mauritius government. Usually Personal Income Tax is collected from an individual from various sources like labour, pensions, interest and dividends. Other forms of taxes also exist which are not imposed on revenue but are instead levied on consumption, known as Value Added Tax (VAT).

In our study we are concerned with both individual taxation on income and the Value Added Tax. 

De facto, as per the MRA, when it comes to Individual Taxation it is related with PAYE, which is the ‘Pay As You Earn system, which was introduced in 1993. ‘This new system aims at ensuring that the amount of tax withheld under PAYE corresponds exactly to the amount of tax payable in accordance with the annual return of income at the end of the income year’ (MRA 2006). 

Value Added Tax (VAT), on the other hand is a tax on goods and services and is charged at a flat rate of 15% in Mauritius on taxable items.

Source: Mauritius Revenue Authority Website

One of the main characteristics of the PAYE system is ‘Employees drawing monthly emoluments not exceeding Rs 16,500 are not affected by PAYE.’ (MRA 2006)

How have we proceeded with the fact check?

Analysis of the Income Taxes

Scenario 1

We made use of the income tax calculator and found that anyone with a monthly salary of Rs 15,000 i.e., a total salary of Rs 195,000 with no dependent does not in fact have to pay income taxes. 

In fact, anyone with a total salary not exceeding Rs 390,000, with or without dependents, does not have to pay income taxes.

NOTE: “Dependent” means either: (a) a spouse; (b) a child under the age of 18 or (c) a child over the age of 18 and who is pursuing full-time education or training or who cannot earn a living because of a physical or mental disability; and a bedridden next of kin under his care.

For the year 2021- 2022, the exemption and reliefs were as follows. The exemption and reliefs for the year 2022-2023, will only be made available as from the 30^th of June 2023. However, through the use of the income tax calculator, we were able to deduce the exemption threshold.

Source: Mauritius Revenue Authority Website

Category	Amount (Rs)
Category A: An individual with no dependent	390,000
Category B: An individual with one dependent	500,000
Category C: An individual with two dependents	580,000
Category D: An individual with three dependents	665,000
Category E: An individual with four or more dependents	745,000

The MRA site has not yet updated the above table which would be valid as from the 30 June 2023. However, from the income tax calculator, we were able to deduce the incomes.

1. Category B, if the net income and exempt income of his dependent exceeds Rs 110,000; 
2. Category C, if the net income and exempt income of his second dependent exceeds Rs 80,000;
3. Category D, if the net income and exempt income of his third dependent exceeds Rs 85,000.
4. Category E, if the net income and exempt income of his fourth dependent exceeds Rs 80,000.

Analysis of VAT (Value-added tax)

We have hence gathered that the Rs 2,250 is not a result of the income taxes. It could rather stem from the VAT on the products consumed by an individual and even then, the total VAT paid will differ depending on the circumstances and on the individual’s needs and wants. 

For instance, someone with a salary of Rs 15,000 might have to pay Rs 2,250, which constitutes 15% of his salary, if he consumes several VATable products. 

On the other hand, if (s)he consumes the products that are zero-rated or exempted from VAT with some VAT included products, (s)he will definitely be paying less. It is even possible, if (s)he consumes only zero-rated or exempted products, to have no VAT to pay. 

However, an individual cannot deprive himself/herself all the time and should at times be able to enjoy more than the basic goods that are zero-rated or exempted from VAT. One could spend on more VATable products one month and be more mindful of one’s expenses the next.

Why does the claim seem unclear? 

Ivor Tan Yan’s claim is not false but rather incomplete to a certain extent and might also be misleading. 

This is because his claim might be interpreted as ‘any individual with a salary of Rs 15,000 will definitely have to pay Rs 2,250 of taxes and thus would only get Rs 12,750 after taxes’. However, this is not entirely true. 

As demonstrated above, the income tax for any individual with a salary of Rs 15,000 is definitely Rs 0 and this under whichever circumstance. Therefore, it should be specified that the Rs 2,250 mentioned in this claim may come from the VAT paid by an individual but this also depends on their monthly consumption patterns. It is perfectly possible that a lesser amount of taxes in the form of VAT are paid or none at all. In the latter case, this would mean that the individual would benefit from the full amount of the minimum wage of Rs15,000.

Submitted as part of an assignment for the module Digital Journalism in Year 3 of the BSc (Hons) Journalism taught at the University of Mauritius by Mrs Christina Chan-Meetoo