It’s all in the Timing

During what we generally consider to be the Christmas period (after 18th December and before the first full working week of January) a ministerial order was gazetted. The order stated that it was to come into effect on January 1st, 2018. The order has the effect of changing the hourly minimum wage rate, raising it from VT170 per hour to VT200 per hour.

Ministerial orders are a type of secondary legislation. This means that they can be used to change the law without having to get a bill passed by Parliament. This makes them useful in a number of ways. They are well suited to things that governments may want to do at short notice or areas where changes happen frequently. However, they are not subject to any Parliamentary oversight. If a minister wants to make a change to the law using a ministerial order (and assuming it is allowed by the relevant primary legislation), she or he can. There is no requirement to take advice. However, we would expect that prudent ministers would take advice and would give consideration to the impacts of the proposed change, both good and bad.

The other significant change that came into effect was the change in the rate of VAT, which was increased from 12.5% to 15%. This is the first change to the rate of VAT (either up or down) since it was introduced more than 15 years ago. This change was made after the VAT Act was amended by Parliament at the end of last year.

Both of these changes are important and we have already seen a lot of commentary on each of them, in this newspaper and on social media. One of the issues that has not received any attention, as far as I am aware, is the significance of the timing of these changes.

There is some logic to choosing January 1 as a changeover date. Mainly this is because as a country, our financial year runs from 1 January to 31 December. But other than that, January 1 is not a good date from which to make such significant changes.

This is the worst time of year for businesses to make the necessary changes to business practices in order to put these changes into effect. Key staff members are likely to be on leave and access to providers of support services (accountants or computer systems people) is also likely to be limited. January is already a busy and expensive month for businesses with licence renewals to complete as well as all the other issues and activities associated with kickstarting a new year.

So it would almost certainly be more helpful to businesses (big, small and otherwise) to be advised of these changes with more notice of the date on which changes have to be implemented. This would give them time to plan implementation, to get advice from relevant government agencies, and to revise business processes so that the changeover is as smooth as possible. March 1st is possibly a better start date for changes of this type.

This may seem like a small thing, and in the scheme of things it probably is. But that does not mean it is insignificant. An ongoing debate in Vanuatu, and elsewhere in our region, is what governments can or should do to promote growth in the private sector. I see mixed messages from the current government about this, some of which seem to be based on ideological concerns that ‘the private sector’ means ‘foreign investors’. This is an oversimplification that is both false and unhelpful.

If we look at Vanuatu 2030: The People’s Plan, we can see that Goal 4 of the Economy Pillar is focused on policies that ‘create jobs and business opportunities and employment for entrepreneurs throughout Vanuatu’. More specifically, policy objective 4.9 commits government to ‘strengthen dialogue between government and the private sector, and enact a robust governance framework for effective partnerships’.

These are good words. Let’s hope that in 2018 we will see them being put into action.

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