## 1musea2024002

## Source details

**Canonical URL:** [1musea2024002](https://www.imf.org/-/media/files/publications/cr/2024/english/1musea2024002.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2024/english/1musea2024002.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2024/english/1musea2024002.pdf.json)

---

### Overview and Key Findings
- Mauritius collects less tax revenue than its peers, which hampers its ability to preserve debt sustainability and undertake critical growth-promoting investments.
- The tax gap in Mauritius is estimated at 5.6 percent of GDP.
- Reforming the personal income tax (PIT) and the value added tax (VAT) could altogether yield 3 percent of GDP in additional tax revenue.
- The expected implementation of the global minimum tax on corporations internationally provides an opportunity to reconsider the tax policy approach to investment promotion.
- A desirable strategy would be to move away from generous benefits, including tax holidays, towards a more neutral taxation of investments.
- Vulnerable households should be protected if revenue-raising measures are pursued, including through compensatory social spending.

### Recent Revenue Developments (Background and Trends)
- Total revenue increased from around 18 percent of GDP in FY2001/02 to reach 22 percent of GDP in FY2018/19.
- Tax revenue increased from 16 percent of GDP to 20 percent of GDP over FY2001/02 to FY2018/19.
- Taxes on sales and production (mostly VAT) rose from about 7 percent of GDP in FY2001/02 to 11 percent of GDP in FY2018/19.
- VAT collection increased from 4.5 percent of GDP to 6.3 percent of GDP (FY2001/02 to FY2018/19).
- Income tax revenue rose from 2.3 percent of GDP to 5.3 percent of GDP (FY2001/02 to FY2018/19).
- Tax revenue accounted for 87 percent of total revenue at end-June 2023.
- The Mauritius Revenue Authority (MRA) was established in 2006 to “manage and operate an effective and efficient revenue raising organization.”
- VAT statutory rate changes: standard VAT rate increased from 10 percent to 12 percent and to 15 percent in FY2001/02 and FY2002/2003, respectively.
- Corporate and personal tax statutory changes: the top CIT rate was reduced from 25 percent to 15 percent in 2008; the PIT rate was cut from 22.5 percent to 15 percent earlier in the 2000s.

### Structural Features and Efficiency Issues
- As of 2021, the statutory minimum income threshold subject to PIT payment, as a percentage of per capita GDP, was relatively high in Mauritius compared to several small island states and investment hubs.
- The VAT registration threshold is relatively high (percent of per capita GDP, 2022).
- PIT deductions are comparably high.
- Top PIT and CIT rates have been substantially lower in Mauritius relative to peers, although the VAT rate has been slightly higher than in small island countries.
- The 2023 PIT reform introduced a progressive band of eleven rates up to 20 percent and abolished the solidarity levy, but:
  - It maintains an allowance threshold that keeps a large share of the population outside of the tax base.
  - It lowers the average tax rate for most taxpayers, including very high earners, thereby reducing overall redistributive capacity and revenue collection.
- Recent policy changes: excise duties on alcohol and tobacco were further increased; VAT exemptions were extended to new mass consumption products; significant tax incentives on imports of electric and luxury vehicles introduced during the pandemic have not been phased out.

### Tax Collection Efficiency Metrics
- C-efficiency for VAT was 55 percent in FY18/19, compared to the average of 75 percent in small islands.
- C-efficiency is notably below 100 percent that would be consistent with “perfect” enforcement.
- CIT productivity increased following base broadening reforms and the reduction of the CIT rate to 15 percent, but the reintroduction of several investment incentives risks reversing these gains.

### Tax Potential, Tax Gap, and Comparisons
- Estimated tax potential for Mauritius: 25.1 percent of GDP (FY18/19).
- Actual tax collection: 19.5 percent of GDP (FY18/19).
- Estimated tax gap (tax potential minus actual): 5.6 percent of GDP.
- Mauritius’ tax potential (25.1 percent of GDP) is somewhat higher than the averages for investment hubs (24.1 percent of GDP) and small islands (23.2 percent of GDP).
- Mauritius’ tax gap is larger than the average tax gap for investment hubs (1.8 percent of GDP) and small islands (2.3 percent of GDP).
- The level of tax expenditures (tax holidays, reduced rates, exemptions, and zero-rating) was about 3.5 percent of GDP in FY21/22.
- The experience of other countries suggests that an increase in tax revenues of up to 5½ percentage points of GDP, to reach a tax-to-GDP ratio of 25 percent, may be feasible.

### Assessment Methodology (Tax Potential Estimation)
- Tax potential estimated with regression benchmarking following Benitez et al. (2023) using IMF WoRLD (2022) data for 157 countries over 1990–2021.
- Explanatory variables include GDP per capita, GDP share of agricultural value added and trade, and government effectiveness (World Bank index).
- Tax potential reflects highest observed levels of tax revenues after controlling for structural and institutional characteristics.

### Policy Options and Reform Recommendations
- Domestic tax policy reforms:
  - Reform PIT and VAT to broaden the base and increase revenue: reforming the personal income tax (PIT) and the value added tax (VAT) could altogether yield 3 percent of GDP in additional tax revenue.
  - Specific PIT scenario: lowering the PIT income threshold and increasing the top rates relative to the current PIT schedule could generate additional revenue of about 0.8 percent of GDP.
  - Consider lowering PIT thresholds by 25 percent while increasing the three highest rate bands by 1 percent, 2 percent, and 5 percent, respectively.
  - Streamline VAT exemptions to improve VAT C-efficiency and revenue yield.
  - Phase out pandemic-era tax incentives that remain in place for electric and luxury vehicle imports.
- International tax policy reforms:
  - Use the implementation of the global minimum tax on corporations as an opportunity to reconsider investment promotion policy.
  - Move away from generous tax holidays and preferential regimes toward a more neutral taxation of investments.
- Revenue administration:
  - Continue measures to strengthen compliance and enforcement to raise C-efficiency closer to peer levels.
- Social protection and distributional considerations:
  - Protect vulnerable households when implementing revenue-raising reforms, including through compensatory social spending.

### VAT and PIT reform: findings and quantified potentials
- PIT reform scenario assumptions and effects:
  - Personal allowance threshold used in calculations: 390,000 Mauritian Rupee (reduced to 292,500 Mauritian Rupee in the reform scenario).
  - Redistributive capacity would increase and the after-tax income share of the richest households would be reduced (Figure 10b).
  - Small number of taxpayers: initially marginal rate at 5 percent then increased to 25 percent in FY2020/2021 for income above Rs 3 million, with average rate capped at 10 percent; marginal tax rate for income exceeding Rs 5 million fell from 40 percent to 25 percent.
  - Up to 80 percent of households have incomes below the initial allowance threshold (World Inequality Database (2021) and household survey information (2017)).
- VAT performance in reference year FY18/19:
  - VAT collections amounted to 6.3 percent of GDP, or about 32 percent of overall tax revenue.
  - Standard VAT rate: 15 percent.
  - VAT C-efficiency in FY18/19: 55.5 percent.
  - VAT gap (relative to taxing all final consumption at 15 percent): estimated at 5 percent of GDP.
- Potential VAT gains from raising C-efficiency:
  - Target C-efficiency: 75 percent (average of small island comparators).
  - Raising C-efficiency to 75 percent would raise VAT collections to 8.5 percent of GDP, an increase of 2.2 percentage points of GDP.
  - World Bank’s 2023 Public Expenditure Review: VAT zero-rating amounted to 1.9 percent of GDP in FY21/22.
- Aggregate tax gap and reform potential:
  - Tax gap estimated at 5.6 percent of GDP.
  - Combined potential from further PIT and VAT reforms: 3 percent of GDP in additional revenue (via lowering PIT thresholds, increasing top PIT rates, and raising VAT C-efficiency to 75 percent).
- Revenue-raising policy levers identified:
  - Rationalize exemptions and zero-rating (notably basic food items, education, health, certain financial transactions, entertainment, land, freeport imports, some food items, printed materials, utilities, transport by air and sea).
  - Lower VAT registration threshold to widen the tax net.
  - Enhance VAT compliance, especially given rapid growth of e-commerce platforms.
  - Protect vulnerable households through compensatory social spending when reducing exemptions or widening the base.

### International taxation and corporate tax policy
- Global minimum tax context:
  - Adoption of the global minimum tax is planned to take place in 2024.
  - Goal: limit choices in setting CIT effective tax rates significantly below 15 percent for profit earned where an entity has little economic substance.
  - Entities part of multinationals with global turnover of at least €750 million are in-scope, with de minimis thresholds at the jurisdictional level.
- Mauritius-specific responses and implications:
  - Mauritius has introduced a Qualified Domestic Minimum Top-Up Tax (QDMTT) to pre-empt top-up tax revenues arising elsewhere.
  - Mauritius introduced the QMDTT already in 2022. However, the rules are not yet in force and delays in their implementation may result in some top-up taxes being collected elsewhere.
  - The QDMTT ensures that these revenues for companies operating in Mauritius accrue in Mauritius but will reduce the effectiveness of some incentives currently offered.
  - Recommended policy direction: move away from selective benefits (tax holidays, generous investment tax credits, large deductions) toward a more uniform and reasonably generous treatment of investments using immediate expensing.
- Tax treaty policy:
  - Mauritius will likely need to continue granting more taxing rights to source countries and more proactively address treaty abuse to maintain its tax treaty network.
  - Anti-abuse measures have been adopted following renegotiations or terminations of existing tax treaties, but these measures are often difficult to administer and partner-country expectations are evolving.

### Conclusions and Policy Guidance
- Strategic priorities:
  - Strengthen tax revenue mobilization to support the aspiration to regain “high-income country” status.
  - Accelerate domestic corporate tax reform momentum in the context of international tax reforms (global minimum tax).
  - Support a medium-term, growth-friendly fiscal consolidation that protects the most vulnerable.
- Implementation caveats:
  - Compensatory social spending should be used to protect vulnerable households when widening tax bases or reducing exemptions.
  - Consider timing effects: incentives that operate through timing effects will retain their effect on marginal incentives under the minimum tax rules.

### Gender gap, Female Labor Force Participation (FLFP), and Growth Dividends
- Key gender and labor statistics:
  - Female labor force participation: 43 percent in 2021.
  - Male labor force participation: 70 percent in 2021.
  - Gender wage gap: 18.5 percent in 2022 (favoring male workers). Authorities’ estimate of the wage gap: 20 percent.
  - Tertiary STEM programming skill (2020 UNESCO data): 2.3 percent of young and adult women can write a computer program, compared to 3.8 percent for men.
  - NEET (not in education, employment or training): about 20 percent of Mauritians are NEET, of which about two thirds are women.
  - Labor force participation is heavily driven by education level: only about 1 in 3 women with up to primary education participates in the labor market, compared with over 2 in 3 women with upper secondary education.
- Potential growth impact from higher FLFP:
  - Scenario: increase female labor force participation from 43 percent to 50 percent (OECD average).
  - Estimated effect: increase real GDP growth on average by 0.8 percentage point in the medium term relative to the baseline scenario.
  - Growth accounting assumptions: output share of labor = 0.3; output share of capital = 0.7; production function estimated using historical labor force and stock of physical capital.
- Policy recommendations to raise FLFP:
  - Finance skill-building, training, and education programs for women, including through spending reallocation away from broadly targeted subsidies.
  - Improve availability of affordable childcare.
  - Further improve legislation on maternity and parental leave.

### Gender policy and implementation (selected measures)
- National Gender Policy 2022-30 (NGP) adopted in March 2022; implementation rate of the NGP stood at 57 percent as of February 2024.
- Prime à L’Emploi scheme:
  - Monthly contribution up to Rs 15,000 for the first year of employment of youths aged between 18 and 35 years and women aged up to 50 years.
  - Monthly allowance paid by Mauritius Revenue Authority for the first 12 months of employment of new recruits, capped to the first 10,000 eligible employees.
  - Modified under the 2023 Finance Act by extending its duration by two years and resetting the coverage to women and disabled individuals.
  - As of February 2024:
    - About 6,500 women, representing about 1 percent of the labor force, had benefited from the scheme.
    - Of the Rs 1.9 billion earmarked to the scheme under the Solidarity Fund in the FY2022/23 Budget, only around 9 percent (Rs 166 million) was used.
    - About 30 percent of eligible beneficiaries (including women) have not taken advantage of the scheme.
- Regulatory and fiscal measures to support FLFP:
  - 2023 Finance Act: compulsory for all companies employing more than 250 employees to provide necessary facilities for workplace-based childcare.
  - Envisages setting up public childcare centers in main areas under a Public-Private Partnership (PPP) model.
  - Allows a double deduction on the cost of setting up a childcare center.
  - Makes it mandatory for all new shopping malls, office buildings and hotels to have a nursing room for women.
  - FY23/24 Budget increases by 30 percent the grant for child daycare centers to undertake upgrading works.
  - Measures to promote gender equality in the workplace and private sector:
    - All listed companies are required to have a minimum of 25 percent of women on their boards.
    - Women-owned micro, small and medium enterprises (MSMEs) benefit from a 10 percent increase in the margin of preference for public procurement of goods.
- Outcomes, comparators, and measurements:
  - Average FLFP was 52 percent in OECD countries in 2021.
  - The 2022-30 NGP updates the 2008 NGP.
  - The length of maternity leave was increased from 12 weeks to 14 weeks in 2015.
- Policy recommendations (selected prioritizations):
  - Improve availability of affordable childcare, with greater focus on market incentives instead of compulsory measures.
  - Increase private sector incentives to invest in daycare facilities; consider cost-effectiveness of private supply to protect government fiscal space.
  - Carefully consider PPP model for childcare facilities, including related quality standards to avoid new fiscal risks.
  - Increase the supply of education and training for young women to improve skills and potential growth prospects, prioritizing supply-side skill-building ahead of demand-based policies such as Prime à L’Emploi.
  - Complement Prime à L’Emploi with more skill-building programs given the 30 percent enrollment gap.
  - Finance skill-building for women by reallocating public spending, considering reallocations from:
    - Untargeted housing subsidies (0.3 percent of GDP).
    - A wage allowance scheme initially intended to be temporary (0.6 percent of GDP).
    - A regressive tax incentive to promote usage of electric vehicles.
  - Consider prospects for public co-financing of maternity and parental leave; currently maternity leave benefits remain the liability of the employer.
  - To create needed fiscal space, consider phasing out untargeted/temporary/regressive programs, increasing social contributions, and strengthening the targeting of the basic retirement pension (BRP).

*Source: IMF staff report excerpts from “IMPROVING REVENUE MOBILIZATION IN MAURITIUS: ASSESSING THE POTENTIAL AND REFORM OPTIONS” (May 1, 2024) and IMF staff chapter content on gender policies (excerpts).*

### 1. Revenue Collection ______________________________________________________________________ 4

### 1. Revenue Collection

### Overview and Key Findings
- Mauritius collects less tax revenue than its peers, which hampers its ability to preserve debt sustainability and undertake critical growth-promoting investments.
- The tax gap in Mauritius is estimated at 5.6 percent of GDP, at the top end of tax gaps of its peers.
- Reforming the personal income tax (PIT) and the value added tax (VAT) could altogether yield 3 percent of GDP in additional tax revenue.
- The expected implementation of the global minimum tax on corporations internationally provides an opportunity to reconsider the tax policy approach to investment promotion in Mauritius.
- A desirable strategy would be to move away from generous benefits, including tax holidays, towards a more neutral taxation of investments.
- Vulnerable households should be protected if revenue-raising measures are pursued, including through compensatory social spending.

### Recent Revenue Developments (Background and Trends)
- Total revenue increased from around 18 percent of GDP in FY2001/02 to reach 22 percent of GDP in FY2018/19.
- Tax revenue increased from 16 to 20 percent of GDP over FY2001/02 to FY2018/19.
- Taxes on sales and production (mostly VAT) rose from about 7 percent of GDP in FY2001/02 to 11 percent of GDP in FY2018/19.
- VAT collection increased from 4.5 percent to 6.3 percent of GDP (FY2001/02 to FY2018/19).
- Income tax revenue rose from 2.3 percent to 5.3 percent of GDP (FY2001/02 to FY2018/19).
- Tax revenue accounted for 87 percent of total revenue at end-June 2023.
- The Mauritius Revenue Authority (MRA) was established in 2006 to “manage and operate an effective and efficient revenue raising organization.”
- VAT statutory rate changes: standard VAT rate increased from 10 to 12 percent and to 15 percent in FY2001/02 and FY2002/2003, respectively.
- Corporate and personal tax statutory changes: the top CIT rate was reduced from 25 percent to 15 percent in 2008; the PIT rate was cut from 22.5 percent to 15 percent earlier in the 2000s.

### Structural Features and Efficiency Issues
- As of 2021, the statutory minimum income threshold subject to PIT payment, as a percentage of per capita GDP, was relatively high in Mauritius compared to several small island states and investment hubs.
- The VAT registration threshold is relatively high (percent of per capita GDP, 2022).
- PIT deductions are comparably high.
- Top PIT and CIT rates have been substantially lower in Mauritius relative to peers, although the VAT rate has been slightly higher than in small island countries.
- The 2023 PIT reform introduced a progressive band of eleven rates up to 20 percent and abolished the solidarity levy, but:
  - It maintains an allowance threshold that keeps a large share of the population outside of the tax base.
  - It lowers the average tax rate for most taxpayers, including very high earners, thereby reducing overall redistributive capacity and revenue collection.
- Recent policy changes: excise duties on alcohol and tobacco were further increased; VAT exemptions were extended to new mass consumption products; significant tax incentives on imports of electric and luxury vehicles introduced during the pandemic have not been phased out.

### Tax Collection Efficiency Metrics
- C-efficiency for VAT was 55 percent in FY18/19, compared to the average of 75 percent in small islands.
- C-efficiency is notably below 100 percent that would be consistent with “perfect” enforcement.
- CIT productivity increased following base broadening reforms and the reduction of the CIT rate to 15 percent, but the reintroduction of several investment incentives risks reversing these gains.

### Tax Potential, Tax Gap, and Comparisons
- Estimated tax potential for Mauritius: 25.1 percent of GDP (FY18/19).
- Actual tax collection: 19.5 percent of GDP (FY18/19).
- Estimated tax gap (tax potential minus actual): 5.6 percent of GDP.
- Mauritius’ tax potential (25.1 percent of GDP) is somewhat higher than the averages for investment hubs (24.1 percent of GDP) and small islands (23.2 percent of GDP).
- Mauritius’ tax gap is larger than the average tax gap for investment hubs (1.8 percent of GDP) and small islands (2.3 percent of GDP).
- The level of tax expenditures (tax holidays, reduced rates, exemptions, and zero-rating) was about 3.5 percent of GDP in FY21/22.
- The experience of other countries suggests that an increase in tax revenues of up to 5½ percentage points of GDP, to reach a tax-to-GDP ratio of 25 percent, may be feasible.

### Assessment Methodology (Tax Potential Estimation)
- Tax potential estimated with regression benchmarking following Benitez et al. (2023) using IMF WoRLD (2022) data for 157 countries over 1990–2021.
- Explanatory variables include GDP per capita, GDP share of agricultural value added and trade, and government effectiveness (World Bank index).
- Tax potential reflects highest observed levels of tax revenues after controlling for structural and institutional characteristics.

### Policy Options and Reform Recommendations
- Domestic tax policy reforms:
  - Reform PIT and VAT to broaden the base and increase revenue: reforming the personal income tax (PIT) and the value added tax (VAT) could altogether yield 3 percent of GDP in additional tax revenue.
  - Specific PIT scenario: lowering the PIT income threshold and increasing the top rates relative to the current PIT schedule could generate additional revenue of about 0.8 percent of GDP.
  - Consider lowering PIT thresholds by 25 percent while increasing the three highest rate bands by 1, 2, and 5 percent, respectively (scenario outlined).
  - Streamline VAT exemptions to improve VAT C-efficiency and revenue yield.
  - Phase out pandemic-era tax incentives that remain in place for electric and luxury vehicle imports.
- International tax policy reforms:
  - Use the implementation of the global minimum tax on corporations as an opportunity to reconsider investment promotion policy.
  - Move away from generous tax holidays and preferential regimes toward a more neutral taxation of investments.
- Revenue administration:
  - Continue measures to strengthen compliance and enforcement to raise C-efficiency closer to peer levels.
- Social protection and distributional considerations:
  - Protect vulnerable households when implementing revenue-raising reforms, including through compensatory social spending.

*Source: IMF staff report excerpts from “IMPROVING REVENUE MOBILIZATION IN MAURITIUS: ASSESSING THE POTENTIAL AND REFORM OPTIONS” (May 1, 2024).*

### 0.8 percentage points of GDP and thus recoup revenue losses from the latest PIT reform.

### 1musea2024002 - 0.8 percentage points of GDP and thus recoup revenue losses from the latest PIT reform.

### VAT and PIT reform: findings and quantified potentials
- PIT reform scenario assumptions and effects:
  - Personal allowance threshold used in calculations: 390,000 Mauritian Rupee (reduced to 292,500 Mauritian Rupee in the reform scenario).
  - Redistributive capacity would increase and the after-tax income share of the richest households would be reduced (Figure 10b).
  - Small number of taxpayers: initially marginal rate at 5 percent then increased to 25 percent in FY2020/2021 for income above Rs 3 million, with average rate capped at 10 percent; marginal tax rate for income exceeding Rs 5 million fell from 40 to 25 percent.
  - Up to 80 percent of households have incomes below the initial allowance threshold (World Inequality Database (2021) and household survey information (2017)).

- VAT performance in reference year FY18/19:
  - VAT collections amounted to 6.3 percent of GDP, or about 32 percent of overall tax revenue.
  - Standard VAT rate: 15 percent.
  - VAT C-efficiency in FY18/19: 55.5 percent.
  - VAT gap (relative to taxing all final consumption at 15 percent): estimated at 5 percent of GDP.

- Potential VAT gains from raising C-efficiency:
  - Target C-efficiency: 75 percent (average of small island comparators).
  - Raising C-efficiency to 75 percent would raise VAT collections to 8.5 percent of GDP, an increase of 2.2 percentage points of GDP.
  - World Bank’s 2023 Public Expenditure Review: VAT zero-rating amounted to 1.9 percent of GDP in FY21/22.

- Aggregate tax gap and reform potential:
  - Tax gap estimated at 5.6 percent of GDP (Section 3).
  - Combined potential from further PIT and VAT reforms: 3 percent of GDP in additional revenue (via lowering PIT thresholds, increasing top PIT rates, and raising VAT C-efficiency to 75 percent).

- Revenue-raising policy levers identified:
  - Rationalize exemptions and zero-rating (notably basic food items, education, health, certain financial transactions, entertainment, land, freeport imports, some food items, printed materials, utilities, transport by air and sea).
  - Lower VAT registration threshold to widen the tax net.
  - Enhance VAT compliance, especially given rapid growth of e-commerce platforms.
  - Protect vulnerable households through compensatory social spending when reducing exemptions or widening the base.

### International taxation and corporate tax policy
- Global minimum tax context:
  - Adoption of the global minimum tax is planned to take place in 2024.
  - Goal: limit choices in setting CIT effective tax rates significantly below 15 percent for profit earned where an entity has little economic substance.
  - Entities part of multinationals with global turnover of at least €750 million are in-scope, with de minimis thresholds at the jurisdictional level.

- Mauritius-specific responses and implications:
  - Mauritius has introduced a Qualified Domestic Minimum Top-Up Tax (QDMTT) to pre-empt top-up tax revenues arising elsewhere.
  - Mauritius introduced the QMDTT already in 2022. However, the rules are not yet in force and delays in their implementation may result in some top-up taxes being collected elsewhere.
  - The QDMTT ensures that these revenues for companies operating in Mauritius accrue in Mauritius but will reduce the effectiveness of some incentives currently offered.
  - Recommended policy direction: move away from selective benefits (tax holidays, generous investment tax credits, large deductions) toward a more uniform and reasonably generous treatment of investments using immediate expensing.

- Tax treaty policy:
  - Mauritius will likely need to continue granting more taxing rights to source countries and more proactively address treaty abuse to maintain its tax treaty network.
  - Anti-abuse measures have been adopted following renegotiations or terminations of existing tax treaties, but these measures are often difficult to administer and partner-country expectations are evolving.

### Conclusions and policy guidance
- Strategic priorities:
  - Strengthen tax revenue mobilization to support the aspiration to regain “high-income country” status.
  - Accelerate domestic corporate tax reform momentum in the context of international tax reforms (global minimum tax).
  - Support a medium-term, growth-friendly fiscal consolidation that protects the most vulnerable.

- Implementation caveats:
  - Compensatory social spending should be used to protect vulnerable households when widening tax bases or reducing exemptions.
  - Consider timing effects: incentives that operate through timing effects will retain their effect on marginal incentives under the minimum tax rules.

### Gender gap, female labor force participation (FLFP), and growth dividends
- Key gender and labor statistics:
  - Female labor force participation: 43 percent in 2021.
  - Male labor force participation: 70 percent in 2021.
  - Gender wage gap: 18.5 percent in 2022 (favoring male workers). Authorities’ estimate of the wage gap: 20 percent.
  - Tertiary STEM programming skill (2020 UNESCO data): 2.3 percent of young and adult women can write a computer program, compared to 3.8 percent for men.
  - NEET (not in education, employment or training): about 20 percent of Mauritians are NEET, of which about two thirds are women.
  - Labor force participation is heavily driven by education level: only about 1 in 3 women with up to primary education participates in the labor market, compared with over 2 in 3 women with upper secondary education.

- Potential growth impact from higher FLFP:
  - Scenario: increase female labor force participation from 43 percent to 50 percent (OECD average).
  - Estimated effect: increase real GDP growth on average by 0.8 percentage point in the medium term relative to the baseline scenario.
  - Growth accounting assumptions: output share of labor = 0.3; output share of capital = 0.7; production function estimated using historical labor force and stock of physical capital.

- Policy recommendations to raise FLFP:
  - Finance skill-building, training, and education programs for women, including through spending reallocation away from broadly targeted subsidies.
  - Improve availability of affordable childcare.
  - Further improve legislation on maternity and parental leave.

*Source: International Monetary Fund (excerpts from the provided chapter).*

### 5. Several reforms and policies have been implemented in recent years to reduce gender

### 5. Several reforms and policies have been implemented in recent years to reduce gender

### Policy framework and implementation
- National Gender Policy 2022-30 (NGP) adopted in March 2022 aims at fostering a gender-inclusive society.
- The NGP acknowledges “deeply embedded” gender imbalances in Mauritius and proposes a framework for the empowerment of women and girls in social, economic, and political domains.
- Implementation rate of the NGP stood at 57 percent as of February 2024.
- Targeted outcomes of the NGP include:
  - Enactment of the Gender Equality Bill.
  - Eradication of all forms of gender-based discrimination.
  - Equity and equality in access to employment.
  - Equal opportunities for women leadership at all levels.
  - Implementation of Gender Responsive Budgeting in all sectors.
  - Recognition of unpaid care and domestic work through provision of public services as appropriate.
- Adoption of temporary special measures is envisaged to help boost gender equality.

### Gender Responsive Budgeting
- The Ministry of Finance and Economic Development is expected to undertake a study on the feasibility of Gender Responsive Budgeting.
- The study results should facilitate an informed decision on resources allocated to Ministries for gender equality mainstreaming.
- In the meantime, annual budgets are encouraged to reflect gender perspectives from every budgetary unit.

### Prime à L’Emploi scheme (labor market incentive)
- Introduced in the 2022 Finance Act to incentivize young people and women to join the labor force.
- Under the scheme, the government committed to provide a monthly contribution up to Rs 15,000 for the first year of employment of youths aged between 18 and 35 years and women aged up to 50 years.
- Monthly allowance paid by Mauritius Revenue Authority for the first 12 months of employment of new recruits, capped to the first 10,000 eligible employees.
- Modified under the 2023 Finance Act by:
  - Extending its duration by two years.
  - Resetting the coverage to women and disabled individuals.
- Regarding women beneficiaries, the scheme currently applies to newly employed women or those who have been unemployed for at least a year under the scheme.
- As of February 2024:
  - About 6,500 women, representing about 1 percent of the labor force, had benefited from the scheme.
  - Of the Rs 1.9 billion earmarked to the scheme under the Solidarity Fund in the FY2022/23 Budget, only around 9 percent (Rs 166 million) was used.
  - About 30 percent of eligible beneficiaries (including women) have not taken advantage of the scheme.
- Reported factors affecting take-up and employer participation include:
  - Some employees voluntarily leave their jobs after being registered under the scheme.
  - Employers bear additional costs per each new employee under the scheme, including those related to traveling, training levy and other emoluments.
  - Employers cannot claim the salary subsidy before fully complying with tax laws.
  - Employers are required to safeguard employment for two additional years, beyond the first year when the salary subsidy is provided.
- Disbursement rate seems to have improved during FY2023/24 but also reflects a reduction in the budgeted amount after the scheme was re-targeted to exclude youth.

### Regulatory and fiscal measures to support female labor force participation
- 2023 Finance Act provisions:
  - Compulsory for all companies employing more than 250 employees to provide necessary facilities for workplace-based childcare.
  - Envisages setting up public childcare centers in main areas under a Public-Private Partnership (PPP) model.
  - Allows a double deduction on the cost of setting up a childcare center.
  - Makes it mandatory for all new shopping malls, office buildings and hotels to have a nursing room for women.
- FY23/24 Budget increases by 30 percent the grant for child daycare centers to undertake upgrading works.
- Measures to promote gender equality in the workplace and private sector:
  - All listed companies are required to have a minimum of 25 percent of women on their boards.
  - Women-owned micro, small and medium enterprises (MSMEs) benefit from a 10 percent increase in the margin of preference for public procurement of goods.

### Outcomes, comparators, and measurements
- Mauritius’ comparators typically have higher female labor force participation than Mauritius.
- Average FLFP was 52 percent in OECD countries in 2021.
- The 2022-30 NGP updates the 2008 NGP.
- The length of maternity leave was increased from 12 to 14 weeks in 2015.

### Policy recommendations
- Achieving a higher female labor force participation can be an important element of Mauritius’ long-term growth strategy.
- Recommended policy directions include:
  - Improve availability of affordable childcare, with greater focus on market incentives instead of compulsory measures.
  - Increase private sector incentives to invest in daycare facilities; consider cost-effectiveness of private supply to protect government fiscal space.
  - Carefully consider PPP model for childcare facilities, including related quality standards to avoid new fiscal risks.
  - Increase the supply of education and training for young women to improve skills and potential growth prospects, prioritizing supply-side skill-building ahead of demand-based policies such as Prime à L’Emploi.
  - Complement Prime à L’Emploi with more skill-building programs given the 30 percent enrollment gap.
  - Finance skill-building for women by reallocating public spending, considering reallocations from:
    - Untargeted housing subsidies (0.3 percent of GDP).
    - A wage allowance scheme initially intended to be temporary (0.6 percent of GDP).
    - A regressive tax incentive to promote usage of electric vehicles.
  - Consider prospects for public co-financing of maternity and parental leave; currently maternity leave benefits remain the liability of the employer.
  - To create needed fiscal space, consider phasing out untargeted/temporary/regressive programs, increasing social contributions, and strengthening the targeting of the basic retirement pension (BRP).

*Source: IMF staff chapter content on gender policies and reforms in Mauritius (excerpts).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1musea2024002.pdf_