An income tax to benefit who

LEAKED documents show that the Government is preparing to spend significant amounts of cash to introduce income tax in Vanuatu in 2017.

Major businesses said their concerns were that the planned expense was for something not yet even approved in principle.

The documents leaked to The Independent show that the government is moving with – as one Port Vila business leader described it – an ‘unprecedented haste’ to implement income tax while the politicians are publically stating that no decision has yet been made.

The government papers talk of around 40 new staff appointments to Customs and Inland Revenue (DCIR) – many of whom will become the income tax department.

A leading Port Vila accountant said that these 40-odd new employees will need to be university graduates to have any real hope of understanding what they are doing.

“This means a monthly salary bill of around at least VT four million before you spend anything else on the usual expenses needed to run an office of that size,’’ he said.

“None of this is of any benefit to the economy or the people of this country.

“One has to ask is the government going to be paying the bill or are the Australian Government going to be picking up the tab? The people have a right to know who is running the country.’’

Outgoing Australian High Commissioner Jeremy Bruer has already vehemently denied that the income tax plan is being driven by Australia and insists that Australia was asked to help establish an income tax regime by the Vanuatu government.

But he admitted that the Australian Government has funded Australian Tax officers, some of whom have been here for around three years.

“But what we are looking at here in this proposal is an Australian look alike tax system,” said another local major business leader.

“I see that Data Torque is here to ‘undertake preparatory work for the system re-development’.  That is an international consulting company which has already been working here for almost a year (they created the ‘Model Of Vanuatu Economy’ or MOVE).

“Who is paying them and why are they re-developing systems which have not been approved in principle, let alone in practice?  And there is going to be a ‘Reforms National Project Manager’ due to start in February.”

The following are excerpts from the leaked documents from Customs, signed off at the time by Collins Gesa, Acting Director Department of Customs & Inland Revenue.

‘New Inland Revenue Policy and Legislation

‘The development of tax policy and legislation, which includes an income tax, is the responsibility of the Tax Policy Unit within the Ministry of Finance and Economic Management (MFEM). The current round of consultations with key stakeholders, including DCIR is drawing to a close. The Tax Policy Unit is analyzing the feedback from those consultations and will then make recommendations to Government as to what will be included in the final draft legislations.

‘As you will understand, the dates on which an income tax is to be introduced is critical to our planning. Current thinking is that the salary and wages income tax will commence on 1 July, 2017. The individual and corporate income tax would apply from 1 January, 2018. Overall this poses a very tight timeframe to undertake the necessary developments to in turn meet those implementation dates.

‘Structure and staff

‘The new organizational structure for DCIR has been drafted to incorporate changes arising from DCIR reforms and Customs modernisation. Once the new job descriptions have been completed the structure will be referred to the PSC for sign off.

‘Based on current estimates it is expected in the short term that around 40 new staff will be recruited into DCIR of which 15 staff relates to the implementation of an income tax. The remaining vacancies relate to a backlog of vacancies to be filled in Inland Revenue and Customs. For Inland Revenue the new staff will be recruited to their substantive positions in taxpayer services, audit and collections but the majority will initially be placed in taxpayer services team to resource the education phase of introducing an income tax.’

Most business leaders that spoke to The Independent said they were convinced all of this proposed new tax system was being driven by offshore sources.

“Collect VAT properly, maybe increase it, and then we could still attract overseas investment, but income tax will be a killer for investment for sure,” they said.