OECD - OECD Tax Policy Reviews: Seychelles 2020

Despite relatively robust growth in recent years, Seychelles faces a number of economic, social and environmental challenges including climate change, economic diversification, population ageing, inequality and enhancing the quality of public services. Many of these challenges will put additional pressure on public finances. In addition, Seychelles is planning major public investments to enhance infrastructure and strengthen resilience to climate change. As a result, the government of Seychelles will likely have to raise additional revenues in the medium to long run. Strengthening the tax system will be particularly important as the scope to use other sources of financing, including public debt and development aid, is relatively limited. Indeed, public debt levels, while drastically lower than a decade ago, remain relatively high, and grants from development banks and donor countries are expected to decline as a result of Seychelles newly acquired high-income status.

Overall, Seychelles total tax take is high compared to other African countries and comparable small island states. At 31.5% of GDP, Seychelles tax-to-GDP ratio is the highest across all the African countries covered by the OECD Global Revenue Statistics Database . Seychelles also collects high tax revenues as a share of its GDP in comparison to other small and highly tourism-dependent island economies. This means that potential changes to the tax system need to be carefully assessed, to ensure that these do not hurt growth or fairness.

Seychelles tax revenues predominantly come from indirect taxes and the business tax. VAT is the largest source of tax revenues, accounting for a third of total tax revenues in 2017. Other indirect taxes play a major role too, accounting for 30% of the tax revenues raised by Seychelles. The third largest source of tax revenues is the business tax, making up 21% of Seychelles total tax take. Personal income tax accounts for about 14% of total revenues, but revenues from social security contributions are low. Property and environmentally related taxes, on the other hand, represent only a very small share of total taxes raised. This suggests that these taxes could play a more significant role in Seychelles tax system.

The business tax burden is highly concentrated on a small number of taxpayers . Indeed, 30 companies accounted for almost 80% of the business tax take in 2017, while companies in the bottom 70% accounted for only 1.3% of business tax revenues. The 30 companies that contribute the most to business tax revenues are predominantly in the financial sector, wholesale trade and support activities for transportation. On the other hand, some businesses contribute only marginally to the collection of business tax revenues in comparison to the role they play in the economy. For instance, the tourism sector accounted for only 8% of business tax revenues in 2017, while it accounted for 33% of total value added in the country and for 47% of total VAT collected.