Thursday, January 25, 2018

Negative Income Tax: Someone’s Finally Trying It

I came across this on Twitter last night – Mauritius is taking on the challenge of implementing a negative income tax (excerpt):

Negative Income Tax scheme: Beneficiaries receive first payment

GIS - 27 November, 2017: The first payment of Negative Income Tax (NIT) allowance to beneficiaries was effected on Friday 24 November 2017 at the seat of the Mauritius Revenue Authority (MRA) in Port Louis in the presence of the Prime Minister, Minister of Home Affairs, External Communications and National Development Unit, Minister of Finance and Economic Development, Mr Pravind Kumar Jugnauth.

Cheques were handed over symbolically to some thirteen beneficiaries under the NIT scheme which came into effect as from 1st July 2017. Out of the 21 800 applications received, 12 100 persons have already benefitted from an allocation. The NIT consists of a financial support from the Government to be effected by the MRA on a quarterly basis to employees whose basic salary is less than or equal to Rs 9 900 monthly.

Before anybody sneers at this, Mauritius has a GDP per capita roughly on par with Malaysia, and the scheme will benefit something like 25% of the workforce. The support isn't much – roughly USD30 per month for the lowest income category – but it's the principle that counts.

One obvious drawback is that only those in paid employment are eligible (full criteria here), which leaves out the informal sector and those out of work for other reasons (such as disability). I don't know Mauritius so well that I can say whether that's good or bad. Nevertheless, here's hoping someone's tracking the outcomes of this policy. That would be one piece of research worth waiting for.

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