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Challenges in investing in Reunion Island

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Challenges in investing in Reunion Island

Investing in Reunion Island: Economic challenges and prospects

Reunion Island, a small gem nestled in the heart of the Indian Ocean, is attracting interest as an investment destination. However, the question of tax relief aid schemes is being carefully evaluated by the Inspectorate General of Finance (IGF).

The IGF recently visited Reunion Island to assess investment effectiveness aid schemes, specifically tax relief. As budget adjustments are being considered, the Confederation of Small and Medium-sized Enterprises (CPME) is closely monitoring the potential elimination of this aid. This tax relief scheme represents a cost of 700 million EUR for all overseas territories. According to the Court of Auditors, French tax niches amount to 100 billion EUR, with costs increasing by 16 % over the past ten years. However, it should be noted that the precise impact of tax relief on the Reunionese economy remains difficult to quantify, as no in-depth evaluation has been carried out so far. A rigorous assessment of the fallout from these measures would be necessary to guide future decisions and ensure the effectiveness of investment policies. The mission of the IGF should result in a report published by the end of July. The government will then use this report to guide decisions on the next finance bill. As we approach the challenging budget exercise of 2024, it is crucial to carefully assess the effects of tax relief on the Reunionese economy.

In this context, CPME Reunion is sounding the alarm on the potential consequences of these decisions, highlighting the collateral effects that could ensue. Gérard Lebon, President of CPME Reunion, underlines the need to adjust this scheme to make it more accessible to small businesses, emphasizing perseverance: « It is essential to continue efforts, or even strengthen them ». Indeed, these are often excluded from tax relief due to the complexity of the files. The CPME is advocating for a simplified approach and better support for small organizations. They are calling for a fair system that allows all companies to benefit from these incentive measures, regardless of their size. The goal is to prevent these companies from turning to specialized firms that siphon off a significant portion of the tax relief, thereby discouraging investment. Alongside this situation, CPME Reunion is committed to setting up an approved prevention group (GPA) dedicated to the island’s business leaders to offer specialized and free support to companies facing temporary difficulties. It also asks the General Social Security Fund (CGSS) to temporarily suspend ongoing recoveries, given the delicate situation of companies. These measures aim to preserve the financial stability of local economic actors.

Support from the Reunion Island Chamber of Commerce and Industry (CCIR)

At the same time, the CCIR plays a crucial role in the island’s economic development. At its general assembly, Pierrick Robert, President of the CCIR, praised the solid financial results for 2022. The entity has a significant investment capacity, almost zero debt, and a financial capacity of around 20 million EUR. In this perspective, the CCIR plans to implement concrete projects, such as the Ecobox in Saint-Benoît, demonstrating its commitment to supporting local businesses and promoting their growth.

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