The Government has proposed a national revenue review reform of its entire revenue and tax regimes with exploring the possibility of introducing new forms of taxes such as the personal income and corporate tax to help bring the desired revenue level needed.
While announcing the proposal, Minister of Finance and Economic Management, Gaetan Pikioune, says the nation will be consulted on any new revenue initiatives that the Government intends to introduce.
The Government plans to make its first nation-wide consultation between July and September of 2016, in all 6 Provinces.
Currently the Government is still in the process of reviewing and designing the various tax options and its implications on the general population and businesses.
“Once the Government is satisfied on an option that is appropriate, supports economic growth, efficient, fair, simple and transparent, it will inform the public who will be given an opportunity to comment and provide inputs on how to improve the proposed option or suggest alternatives”, the Minister says.
He says the Government intends to see the implementation of some of these reforms during the rest of this year 2016 and years to come.
“The current Government is always committed to ensure current review does not jeopardize anyone from enjoying a better quality of life but also allow every citizen to be more responsible and committed to their tax obligations,” the Minister adds.
“Let me begin by just clarifying the fact that the decision to undertake this revenue review is a current Government decision, in accordance with its 100 Days’ Plan.
“As a result, the Government through its Council Of Ministers established two working committees (Revenue Review Project Team 1 & 2. Revenue Governance Committee) to undertake the tax review.
“Again let me affirm to the nation that this is not a foreign agenda pushed by some foreign advisers as some have suggested in the media and social media.
“It is a Government decision and the Government will take full responsibility over any final decision on this tax reform.
“The Government will certainly seek assistance externally, but only on technical areas that we may lack the capacity; otherwise the current review is driven by our local experts in the government.”
The mandate of the current revenue taskforce is to review non-tax revenues, tax administration and tax law reform.
• The first task is to review the current policy and administration of fees, charges and levies for services provided by the Vanuatu Government and recommend improvements to the policy framework, administration arrangements and any other issues that would improve the effectiveness and efficiency of Vanuatu’s non-tax revenue system.
• The second task is to review how the Department of Customs and Inland Revenue (DCIR) administers taxes (including customs and excise) in Vanuatu and recommend improvements to structure, organisation, technology and law and practice that may improve voluntary compliance with tax and customs laws and effective administration and enforcement of Vanuatu’s taxation laws.
• The final task of the Taskforce is to review current tax policy and law including import duties and excise and VAT exemptions, and tax like fees, such as the business license tax. Part of this task is to explore the feasibility of introducing Income Tax (corporate and personal), capital gains tax and other taxes. Let me assure the public that this work is still ongoing and any final decision by the Government of the day will be made known to the public through public consultations.
The Minister says as the population of the country increases, the citizens require more and better services. Unfortunately the current resource envelop of the Government cannot meet all the demands, therefore the Government has to review its taxes and other fees and charges to ensure that it can finance the needs of the country.
“It is evident that unless the Government embarks on introducing major revenue reforms that can bring in substantial amount of revenue, it will not be able to fund all its public service demands such as better education and health service, which therefore mean that the Government would be deemed irresponsible to its citizens,” he continues.
There are measures that the Government has already embarked on, such as a better control of its overall expenditure program but again current public service demand is huge.
Additionally the Government has signed up to joining the WTO, and has also committed to PACER PLUS and this will certainly have impact on current government revenue streams such as Import Duties and Excise Tax. Our international and regional commitments mean that we have to make some trade-offs with our current revenue streams to pave way for the implementation of new ones and to improve our compliance capabilities given the limited amount of resources given to our revenue collecting agencies.
To conclude, the Minister says the Government will continue to ensure that Vanuatu remains a competitive place for investments with reasonable tax regimes in the region. Under the current review, the Government also plans to address issues that contribute to the high cost of doing business in Vanuatu, which is currently an area that also requires a greater Government attention.