Tax is a very important part of the social fabric. It is supposed to facilitate governments and institutions, finance social projects and public services. It finances the law and order that people have come to expect in a ‘western’ society.
Then we have Vanuatu. Yes it’s true; we do have a health system, we do have roads and we do have a police force and an education system. Are they effective? NO!
We have over the years had little if any cohesion politically to ensure that these institutions are grown with the population and mature with Vanuatu as she grows. The onus has been on the politicians to be politicians and focus solely on their individual and sometimes collective survival. Well, last year this all changed when we saw 14 MPs sentenced.
Now we have some cohesion and a sense of maturing in a group of people that appear—on the surface anyway—to be trying to implement services and ensure that the average Ni Vanuatu is getting improved service delivery.
But Vanuatu still struggles to provide any form of downward accountability to its citizens.
We have an Opposition that is providing the Government with mature and sensible criticism, and a Government that is actually listening and is not scared to heed ideas from Opposition when they see merit in them.
For the first time in the last 16 years that I have been here we have what seems good, stable governance, which is necessary for economic and social security for any country. Vanuatu is no exception. What still makes the Vanuatu fragile is the impact of the recurrent natural disasters that adversely affect the population in general.
What we don’t have is the necessary knowledge that goes with this new found choir and we find ourselves with a certain naivety. This is highlighted with the Australian Tax Office bullying its way into this new grouping of politicians and filling their heads with crazy ideas. Of course they will deny it, and of course they will provide advisors—not to help them help Vanuatu, but to help the ATO to try and get the information they so desperately need to go on some wild goose chase and make an example of some poor band waste even more of the Australian tax dollar.
Enough now. We need to man-and-woman up and see through this and set in place something that works for us. We need to be educating our young people and helping them to actively participate in defining what works for this country.
We need something that is uniquely Vanuatu that they identify with and works in a practical way for the many different segments of the population.
Is it that easy.
We don’t have a tax base. In the foreseeable future, we will not have a tax base for income and corporate tax.
We do however have a tax base for our VAT. Vanuatu is perfect for this type of revenue collection.
We have so many people that are not VAT registered. Nor do they have business licenses. They are our lost or hidden economy. The bus driver; the transport or taxi driver; the mamas at the market; the fisherman. They all make money and they all do well, but we can’t TAX THEM CONVENTIONALLY. So we must use our VAT to ensure that we have a consumer-pays system that casts a net over everyone.
Then we need enforcement. We need to ensure that our collection agencies are beyond reproach—by that I mean incorruptible. We need to ensure that when VAT is due it is paid, and we need this to be enforced to a man, not just selectively.
Too often we criticise what others are doing and yet fail to provide a solution so hear is my solution:
We need to increase the VAT to 13%, then we need to have a 1% turnover tax which is collected on the same form as the VAT and payable direct to Vanuatu Government. This is not variable—if you turnover 4,000,000vt for the month, you pay 40,000vt.
Then we all pay a Tourism Tax of 1% which is for tourism promotion and development and advertising, paid direct to VTO and is not for consolidated revenue. This will ensure an increase in jobs and more turnover in the domestic economy as all the middle and low income earners tend to spend here in Vanuatu and the money does not go overseas.
The 1% turnover tax and the 1% tourism levy based on turnover is solely for the purpose of raising revenue for the government to ensure an increase in available funds. It is charged as VAT but is based purely on gross income.
The VAT is only lifted from 12.5% to 13%. The reason it should be on the same form is because all the information is right there and it is a simple matter of a few extra boxes and collection can start.
Then we look at our VNPF we increase it from 8% to 12% of which 6% is paid by the employer and 6% is paid by the employee. This is a simple form of income tax and payroll tax. This would ensure that 33% of all VNPF money collected is for consolidated revenue. The reason we should use the VNPF is simply because the information is there. It is easy to implement and provides a nice revenue stream for the government and the legislation required is minimal. This is a system we are all used to and would not adversely affect our current way of doing business.
It is essential for this to work, that the collections are done efficiently and fairly and people whom try and bend the rules to suit themselves need to be penalised accordingly, complacency and corruption will not solve anything.
Good open dialogue is the only way forward, the government has identified a problem, put your hand up and seek help. You are not ostriches with your head in the sand. It’s okay not to have all the answers but we the people of Vanuatu collectively can find a solution that works for Vanuatu.
A broad based Income tax and corporate tax will just kill Vanuatu, destroy the vatu, put the cost of living beyond reach for the average person and is quite simply not the solution for a country that has our dynamics. An improved VAT is the only fair way forward for Vanuatu.