Tax expert to Vanuatu Govt: don’t repeat the mistakes of the 1990s

tax Vanuatu

A story familiar to many here in Vanuatu and especially those concerned in Finance in government: Nik Soni, who worked with governments here that long ago, after a well developed advisory time in other developing countries, had much to say about Vanuatu’s yet-to-be-unveiled tax plan on Coffee & Controversy on Buzz 96 FM on Tuesday. Not repeating the mistakes of the 1990 is surely the clearest signal of where we are likely to go wrong. But before getting on to the worst early wrongdoings of the late 1990s, Soni was full of praise for the 2017 Government making so much more of public consultation. Too right.

The nitty-gritty of where Vanuatu started going wrong in the 1990s, according to Nik Soni is the balance between income tax and VAT. 20 years ago, Soni revealed, VAT “was chosen as the preferred tax option because it was easier to collect than income tax. Ironically, now income tax is being touted as the best way to compensate for difficulty in collecting sufficient VAT revenues”

He goes on: “I’m not saying I’m for it or against it. I think there needs to be a real understanding of what the implications are. A lot of the positives in the income tax are based around one figure which is this revenue. I don’t know who did it, but that figure is essentially it. The benefit of income tax, as far as the report goes, is that one figure. That’s a very dangerous way to do government policy”, he says. Daily Post carries the full report of the tax discussion.

New Zealand is strongly backing up its support for Correctional Services, which in Santo will now be known as Mauria meaning ‘new life’ in a Santo language. Mauria is the new correctional facility in the northern town and cost the Government of New Zealand Vt 180 million, and supplied a good working environment for some 200 local workers as the building went on. Learning to change attitudes and behaviour and respect the lives and rights of others will be topics of discussion often enough in Mauria.

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4 Comments on “Tax expert to Vanuatu Govt: don’t repeat the mistakes of the 1990s”

  1. Nasimal ( Nasingamelip ) says:

    When we are talking about income taxes we are actually talking about money but so far we have seen mismanagements leading to our compensation culture and it has to stop .The best way to introduce this tax if this government need’s to , is for them to study every avenues to see and come with an idea that is fair and simple for our people on the street to understand . My imput is to put 10% tax on everyone who is working and earning wages or sells a bag of copra or kava and corporate business .i.e If anyone sells a bag of copra & earn him or her 2,200vt , he or she pays 220 vt tax .If someone earn’s 60,000vt per month ,he or she pays 6,000vt and someone earn’s 1,000, 000 vt per month he or she pays 100,000vt tax . I called that fairness across the board as long as those taxes are managed carefully and transparent . Warning to our MPS and public sectors that , they must not ask excessive high salaries . Thank you and I pray our AHAYAH ASHAR AHAYAH bless and guide you all .

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  2. S. M. says:

    Let’s stop the fear mongering attitude. The people of Vanuatu don’t need tax. They just need a government who knows how to administer the revenue generated by other sources. Who is pushing so hard to impose taxes? I think we all know …. right?
    On the other hand when a country is governed by foreign finances, this is NOT an independent country! How can Vanuatu be independent, when the Australian, Chinese, and Kiwis are putting money into developing this country. Why is the government accepting money from everywhere, and than states that Vanuatu is independent?
    Why is Vanuatu not taking the example of other less developed countries? Why nobody is not willing to look how other countries generate revenue without imposing taxes? There are so many examples in the world …. but as long as Vanuatu doesn’t stop taking money fron it’s neighbours , Vanuatu will not be independent, ever, and other interests will impose their rules in a so called ” free” country!

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    • There’s a number of fallacious arguments that you make here.

      In saying “Vanuatu doesn’t need tax”, presumably you are referring specifically to income tax, and not to the different taxes Vanuatu already has – the value-added (consumption) tax, import duties, rental income tax, transaction tax, etc.

      Here’s a map of of all of the countries who don’t have an income tax. Not a single Least Developed Country among them, but plenty of ultra-wealthy states who have other sources of income, for example oil revenue.

      Countries/Territories which have no income tax

      “Who is pushing so hard to impose taxes?” There’s no conspiracy here. The Vanuatu Government has a growing population who need health, education and all of the services they are entitled to as citizens, and it needs to develop better infrastructure. Vanuatu necessarily has to increase its revenue base to support its population and development needs. This is an entirely legitimate domestic policy decision, and to speculate that unspecified foreign agents are trying to force a policy change is just laughable.

      Vanuatu is “governed by foreign finances”. This is patently false claim. The country with the highest level of foreign debt globally is the United States.

      In the list of external debt held by all of the 206 nations of the world, Australia comes in at #12, China at #15, NZ at #53.

      Vanuatu, by comparison, has comparatively one of the lowest amounts of external debt, coming at #189, with USD208.1M of debt in 2016. (Source: CIA World Factbook)

      Even by the measure of external debt to GDP ratio, Vanuatu is in better shape than many large countries: in 2016, it was 34.1%, compared to 254% for Australia.

      All countries take money from other countries, whether via trade, remittances or development assistance. Vanuatu receives relatively high levels of development assistance at present, and has issues with existing revenue collection. But it wants to change this – how on earth is Vanuatu to do this with such a tiny tax base?

      As you say, let’s stop the fear mongering attitude.

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      • Mike says:

        If Vanuatu has been growing , in the past and it has done well then with the existing system as you state that the country has low external debt, so why need more tax now. What you need is transparency in the accounting of the existing taxes as to where they go. Spend the time and effort in where the funds are going now. I believe that to say we need more taxes might be taken as a sign of incompetence by the ones who are asking for it or question their specific motives.

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