This is not a consultation

A slide from a presentation to the Media Association of Vanuatu

The Vanuatu Daily Post cannot endorse the current government tax plan.

After numerous discussions, considerable study and analysis, and careful consideration, we are left with no choice but to conclude that that plan as it stands today is without merit.

There is no consideration given to the downsides of the proposal. The plan dismisses viable alternatives with little or no discussion. It makes false assumptions.

It makes promises it cannot keep. It places an impossible burden on the very people who contribute most to whatever prosperity and well-being we already enjoy.

This newspaper intended to remain neutral in the tax debate. We saw our primary responsibility as one of representing the opposing arguments to the general public and letting them judge.

We still encourage everyone to weigh the merits of the proposal and decide for themselves.

But we can’t endorse a plan that raises more questions than it answers.

We asked the revenue review team for an assessment of the potential downsides of the plan.

Specifically, we wanted to know what they thought would happen to inflation, employment numbers and to GDP growth. No data was available on any of these key indicators.

We asked about the assumptions that went into the revenue forecasts. When we expressed our concerns to the revenue review team yesterday, they said they would seek permission for us to see a sanitised version of what they call the Model Of the Vanuatu Economy, or MOVE.

It has to be said that we first requested a background briefing on these materials at the beginning of August, and repeated the request a number of times since then.

Models such as these are often subject to confidentiality rules, because some of the data can be sensitive. We accept that, and took the uncommon step of proposing to negotiate what would be released to the public. The team has expressed a willingness to support our request, but we have no formal assurance that we will be able to see things any more clearly between here and mid-November, when the consultation ends.

When we asked about the availability of analysis of various aspects of the plan, Acting Finance DG Tony Sewen said, “At this point in time, we don’t have a detailed report on that.” That’s just not acceptable. We can’t have this conversation if we don’t have the necessary data.

It’s not the civil servants’ fault. Based on their own statements and on what we’ve observed, they were given an impossible deadline by the government. They’ve done their level best to prepare. Mr Sewen explains: “As you know, the government gave very little time to us to prepare this, and all the team members have their day-to-day jobs to do as well.”

Rushing half-cocked into a plan that will not only transform the national economy, but could damage it irreparably, is the height of folly.

We accept that Vanuatu’s revenue needs are rising, and have written at length about the impending cash flow crisis brought about by an intemperate dash for cash in 2011-12. But we cannot—will not—allow that to justify visiting the sins of our political fathers upon their children.

According to the current proposal, the entire income tax burden would be borne by about 6,000 people. They are expected to produce VT600 million in revenues in the latter half of 2017. That’s VT 100,000 per person on average in just six months.

But half of that number will pay a pittance, some only a few thousand vatu. The lion’s share of the tax burden will be carried by just 3,000 people.

These are the same 3,000 people who are largely responsible for all private commercial activity in this country. In 2018, revenue projections for corporate and personal income tax combined rise nearly eightfold to 4.4 billion.

In 2019 they rise by another 16%.

In 2020, they rise by another 15%.

The following year, they rise by another 8%.

These figures are frankly not believable. But this is the pie in the sky that is being sold to the people of Vanuatu. We’re not saying the government is lying. We’re saying they’re dead wrong.

The entire proposal is rife with contradictions and omissions, as well as factual and analytical errors. The list of deficiencies is too long to fit in this space.

Next week’s Vanuatu Business Review will feature a complete dissection of the plan, such as it is.

But we cannot wait any longer. The government needs to know that this plan is ill-considered, rushed and doomed to fail.

Dan McGarry

Media Director

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