For this dissertation the purpose of the research is to analyse the evolution of the CIT reforms in Mauritius, more specifically after the comprehensive reforms initiated in 2006 and assess their effects on key macro-economic indicators
4.2Research Approach
The research approach influences design and gives the researcher the opportunity to consider how each of the various approaches may contribute to, or limit, his study (Creswell, 2003). The research approach refers to the deductive/inductive and qualitative/quantitative approaches
4.2 .1 Deductive versus the Inductive Approach
Marcoulides (1998) defines the deductive approach as a testing of theories. The researcher begins with a set of theories in mind and forms the hypotheses on their basis.
After that, the research tests the hypotheses. The inductive approach, on the other hand, follows from the collected empirical data and forms concepts and theories on the basis of this data (Marcoulides, 1998).
This study follows the deductive approach for two reasons. In the first place, it is beyond the expertise and the academic knowledge of the researcher to propose a theory and then test it through observation. In the second place, the deductive approach appears more appropriate to the purpose of this study which is to analyse the evolution of the CIT reforms in Mauritius, more specifically after the comprehensive reforms initiated in 2006 and assess their effects on key macro-economic indicators
4.2.2 The Qualitative versus the Quantitative Approach
The quantitative tools for data analysis generally borrow from the physical sciences, in that they are structured in such a way so as to guarantee (as far as possible), objectivity, and reliability (Creswell, 2003). Here the researcher is objective and the research results are numerical. Qualitative tools, on the other hand, are based on content analysis, among other things and are presented in non-numerical format. Even though they allow the researcher to gain a very deep insight into the topic that he is investigating, they are not suited for all types of studies. In addition to that, the quantitative tools are objective and straightforward and, so, are ideal for testing the validity of certain hypotheses.
The value of qualitative data analysis cannot be denied. Creswell (2003) explains that it allows researchers to conduct in-depth explorations of a particular phenomenon. This could not be used in this study. There are two reasons why the researcher decided to use quantitative, instead of qualitative data analysis. The first is that there was no chance to conduct interviews and gather the material that is needed for qualitative data analysis. The second is that the researcher had already identified the key determinants that will be used in the study : Gross Domestic Product, Corporate Income Tax revenue, Gross Domestic Fixed Capital Formation and Foreign Direct Investment
Due to time constraint survey has not been carried out through questionnaire and the most convenient method for the research has been found by referring mainly to secondary data. In addition, opinions have been gathered through in-depth interview with officers involved in the formulation, implementation and monitoring of corporate tax policies/measures at the Ministry of Finance and Economic Development as well as the Mauritius Revenue Authority.
4.3 Data Collection
According to Jackson (1994) the value of a research is related to its data collection methods and importantly, whether or not it includes both secondary and primary data.
As Creswell (2003) states, secondary data, which is an unobtrusive data collection method, depends on the location of pertinent and verifiable previously published academic studies and theories .
For this study, the necessary secondary data for the period under study was obtained from various sources. These include reports from the International Monetary Fund (IMF), Statistics Mauritius, Mauritius Revenue Authority (MRA) , Bank of Mauritius (BOM), Ministry of Finance(MOF), Treasury as well as published interviews, and case studies. The data for the Foreign Direct Investment (FDI) are from the BOM. Opinions through indepth interviews have also been thered from the officers involved in the implementation and monitoring of tax policy reforms at the MOF and MRA
4.4 Variables Defined
The section below gives a definition of the different key variables.
Gross Domestic Product
Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
GDP = C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)
Gross Domestic Fixed Capital Formation
Gross Domestic Fixed Capital Formation (GDFCF) consists of the net additions to the assets of producers of tangible reproducible goods which have an expected lifetime of use of more than one year.. These assets are buildings, plants, machinery and transport equipment. The additions are valued at purchases’ prices. Non-reproducible tangible assets such as land and mineral deposits are not included in gross capital formation. However, outlays on improvement of land and development of mining of assets are considered as gross domestic fixed capital formation.
Foreign Direct Investment:
Foreign Direct investment (FDI) is investment made to acquire a lasting interest in or effective control over an enterprise operating outside the economy of the investor. FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy, including reinvested earnings and intra-company loans, net of repatriation of capital and repayment of loans. FDI net outflows are the value of outward direct investment made by the residents of the reporting economy to external economies, including reinvested earnings and intra-company loans, net of receipts from the repatriation of capital and repayment of loans. These series are expressed as shares of GDP.
Corporate Income Tax Revenue
Corporate Income Tax (CIT) revenue is the tax that is paid to government by a corporation based on the amount of profit generated
4.5 Limitation of the Study
The study has been based on secondary data only . Although this source of data is obtained in a lesser time and at a lower cost , there is a danger that the data may contain some bias . In addition important factors can be overviewed especially when using aggregated data
4.6 Summary
This chapter has argued that the research methodology that is most suited for this study is a quantitative, deductive one which uses secondary data. The next chapter will study’s
