THE TAX PLAN’S POLITICAL COST

There’s a right way and a wrong way to politicise the tax debate. We’re doing it the wrong way. See our editorial on the topic.

On October 3, 2017, the Council of Ministers adopted the Revenue Review Committee’s controversial report.

The document, titled ‘Vanuatu Revenue Review: the case for revenue and modernisation’, is substantially unchanged from the version first touted to the public over a year ago, despite nationwide consultations, numerous expert submissions and widespread public debate.

What is new is that the government has reversed course on the VAT, and committed to raising the tax to 15% by the beginning of next year.

The decision does not specify an actual date for the imposition of personal and corporate income taxes.

It does, however, give the government the mandate for these taxes to be introduced “at a time to be determined by the government”.

The decision does set out a timeline for the enabling measure to be put into place.

It requires that the recommendations of the Review of Government Machinery Task force be implemented no later than the end of 2018.

The Daily Post reported in April that this review was conducted

by a governance committee, “made up of the Ministers, DGs, and Political Advisors”.

It also requires that the Expenditure Review Committee’s recommendations must also be implemented by the end of 2018.

So too must the recommendations of the non-tax revenue review.

Non-tax revenues include rents, interest on loans, police fines and other cash penalties, and dividends and profits from publicly owned companies.

Cash registers must be standardised as well before the end of 2018.

The Constitution and public service-related legislation will also be implemented “to allow public servants to be put on contract, and other measures to enhance the performance of public servants”.

The Police, Teaching, Judicial, and Public Service Commissions would also be subject to “merging and standardisation”.

The State Owned Enterprises bill must also be submitted to Parliament by mid-2018, “and then all SOEs reformed to comply”.

The budget for the Government Remuneration Tribunal’s proposed salaries package has been approved, the proposed restructure has, however, been shelved.

Lastly a 5% export levy currently collected by the Vanuatu Commodities Marketing Board is “to be diverted to be collected by Government”.

The Prime Minister’s Office and the Ministry of Finance are tasked with making all this happen.

This comes amid conflicting reports of a draft motion of no confidence being circulated by a backbench member of government, with the tacit support of at least one senior cabinet member.

It is known that there is division within the government over its revenue plan, and the imposition of a rise in the VAT has been seen by some as an implicit concession that income taxes cannot be implemented any time soon. Others, however, are interpreting this latest decision as a Solomonic decision to join the income tax and VAT babies at the hip, as it were.

The Speaker’s Office has confirmed that no motion has been deposited at this time.

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