A household survey essential before taxation changes, says ILO

tax Vanuatu

There is one item in today’s news which the Vanuatu Daily Digest feels should be compelling reading for everyone, certainly the dozens of townspeople the editor meets on buses from day to day. All are bewildered by the range of ideas politicians, government officers and experts are expressing on the topic of taxation for wage earners and companies. The item referred to is a front page article in Daily Post in which Jonas Cullwick carefully details the recommendations of a wages specialist of the International Labour Organization (ILO) on the income tax proposal. What’s more, the ILO specialist is here for the rarely-reported Tripartite Labor Advisory Council, TLAC, which represents Vanuatu’s government, employers and workers in the country. TLAC held a public lecture and meeting at the Grand Hotel. The ILO expert, Daniel Kostzer, says Vanuatu needs a more evidence-based approach to the issue of taxation and a household survey is necessary. Yes, indeed. And the ILO must have assisted many small and formerly dependent territories achieve the introduction of taxation on businesses and workers when appropriate in the past. Let us welcome their assistance for us here.

Most everybody would acknowledge we have a government which is trying to undo the wrongs of the past and to get Vanuatu on the path to economic independence, touted as of utmost importance by everyone since Independence Day. Our present government is showing its care in this regard in opening up the taxation discussion and planning to take it to all provinces. The National Convention Centre seating 2,000 is hired to enable the consultations to move forward and allow any and everyone to comment.

We know now for two days, since the return of the Finance Minister and delegation to the IMF/World Bank meetings in the United States that Vanuatu wants to meet deadlines which will demonstrate its opposition to money-laundering and the financing of terrorism through the tax haven.

And it has always been assumed we must take full control of the expenses for our education and health, like any other independent and responsible country. This duty should be less the responsibility of caring neighbour countries of greater wealth than it remains in tiny Vanuatu. Again, it is part of the Independence ideal.

So some of the things stated by Daniel Kostzer of the ILO …

“We need a household survey where we could get information around expenditure patterns” (essentially what people need to survive). “Tallies are needed in order to get a reasonable and sensible analysis of where to start or where things are going to go.”

“Labour is going to become more expensive,” Kostzer added, because the proposals in place all tended to indicate this, he claimed. “Some loosely-taken decisions in a short period of time may have consequences for generations.”

He pointed out how wage reductions could lead to high unemployment, but also how greater staff turnover may be required by employing companies if labour costs go higher. “In a country like this you have a comparatively small layer of workers in a formal market that can be a problem.”

Commissioner of Labour Lionel Kaluat said TLAC organized the meeting and the ideas reflected therein will be seen in decisions of the Tax Review Team.

Employer representative Robert Bohn Jr said what many witnessing the taxation consultations must feel: “We believe Government has no idea how an income tax will most affect people in the middle to lower part of the economy and the Government has not taken this into consideration because tax reform will have a big impact on them in terms of its flow through on the economy. There has to be more consultation before government can go ahead on the plan because it will change the economy big-time forever.”

Vanuatu Council of Trade Union’s Loreen Baniuri categorically stated that VCTU does not agree with income tax implementation in Vanuatu because they believe Government should not tax the ‘sweat of the workers’… “We hope government will listen to workers and employers that they do not agree to income and corporate tax and we ask that government find other means of taxation.”