AS the peak body representing private sector, the Solomon Islands Chamber of Commerce and Industry (SICCI) has always advocated for tax reform as a priority and reiterates its position that a review to the country’s tax system must reduce the high burden on businesses and individuals.
To achieve these reforms, SICCI recognizes that the Solomon Islands Government (SIG) is a key stakeholder.
SICCI is of the opinion that the current tax system imposes a very high tax burden when compared to other Pacific countries and is outdated, inefficient, complex, expensive to administer and anti-competitive.
SICCI believes the current tax system imposes high compliance costs on taxpayers and in addition, encourages unproductive tax avoidance and evasion activities.
Moreover, it does not actively support growth in new sectors.
Government might be of the opinion that the environment is conducive for new businesses, but this is not so.
For example, exporting industries might be granted an exemption as a new or expanding business but the overall tax burden cancels out any advantage to be gained through such growth-oriented practice.
“A review of the current tax system that is comprehensive and holistic from the starting, will examine problems with the current system and seek solutions to deliver a tax system that will promote economic growth and one that is fair, simple and broad-based, which ensures everyone who is liable to pay tax, pays the correct amount,” says SICCI Board Chairman, Jay Bartlett.
Mr Bartlett also reiterated the Chamber’s position for Government to amend the Pay As You Earn (PAYE) tax as this will be an improvement for the working individual in terms of her/his disposable income.
An analysis done by the Economic Association of Solomon Islands (EASI) to inform the SICCI Tax Position Paper (2018) demonstrated that increasing the non-taxable threshold from $15,080 to $30,000 would increase Government revenue by $1,036,695,000 per year. Largely through spending by individuals captured by the Government in other taxes.
This amount ($1,036,695,000) is approximately 50% higher than what is currently collected.
Mr Bartlett maintained that low and middle income earners are taxed at a rate that is far too high.
“Increasing the minimum wage impacts positively only on minimum wage earners but what about all the other hard-working Solomon Islanders that are struggling to make ends meet.
“PAYE needs to be reviewed and the thresholds need to be increased so our employees can earn a decent living,” he said.
If you earn more than SBD$60,000 then 40cent out of every dollar you earn is paid in tax – nearly half of your income is paid in tax.
“With all the obligations we now have in modern society such as transport, rent, school fees and the high cost of living, Government needs to recognise this not just through the Basic Minimum Wage but by increasing the Tax threshold for PAYE – we need bold, decisive action from our Government that will benefit the majority of our workers,” Mr Bartlett said.
SICCI has consistently highlighted this issue with the Government through available platforms including the SIG-Private Sector Advisory Group meetings established by the Memorandum of Understanding (MoU) signed in 2017.
Meanwhile, Vice Chair, David Rupokets said SICCI is supportive of the work the Ministry of Finance and Treasury through the Inland Revenue Division and the Economic Reform Unit is doing on the Tax Administration Bill (TAB).
SICCI welcomes this new bill, seeing it as a timely initiative by Government.
“SICCI acknowledges the Government for initiating and progressing these reforms,” he said.
“The important thing is that there is dialogue between Government and the taxpayers and in the case of SICCI, our member companies.”
The creation of the new Tax Administration bill is a component of Stage 1 of the Tax Reform Agenda initiated by MoFT, launched in 2017.
SICCI understands that Stage 2 will involve the review of Income Tax followed by other Taxes.
On Wednesday 6th February 2019, SICCI convened its Tax Experts Working Group (TEWG). The group discussed the draft Tax Administration Bill (TAB) following a presentation by the IRD Commissioner, Mr. Joseph Dokekana.
After the IRD Commissioner’s presentation on the details of the Bill, members of TEWG raised issues concerning fairness, consistency, delegation of roles in the Bill, and the need to clearly spell out the provisions in the Bill to avoid confusion.
“Following up on tax affairs is a time-consuming activity because of the different requirements you have to meet for different types of taxes. Overall the Bill covers many important administration issues faced by businesses. From the discussions of the Tax working group, we have agreed that there are a few areas that need polishing,” SICCI Advocacy Officer, Mr John Ta’amora, said.
“Fairness in paying and reducing the cost of paying tax was also a key point raised during the meeting,” he added.
SICCI Board Chair, Mr Bartlett maintains: “SICCI has the goal that through our contributions, and that of other stakeholders, our Tax System will be fair, simple enough to follow which enhances taxpayer compliance in the country. We encourage the Government to take a broader view of taxation. One that sees the importance of course in raising much-needed revenue, but one that does not stifle businesses and growth in the country.”