Tax laws are constantly in a state of flux

Tax is something no individual can avoid and it is the major source of Government revenue. Therefore it’s importance can and should never be underestimated. This week in Hard Talk,
30 Aug 2014 10:19

Tax is something no individual can avoid and it is the major source of Government revenue. Therefore it’s importance can and should never be underestimated.

This week in Hard Talk, we interview a tax barrister and solicitor practising in Australia and New Zealand who also recently got admitted to practice law in Fiji.

Rprasadoneil Prasad grew up in Fiji and attended Marist Brothers High School.

He then completed law and commerce honours degrees from the Auckland University.

Mr Prasad has worked as a commercial and taxation lawyer in Australia and New Zealand including at internationally-recognised Deloitte, Ernst & Young and as a senior solicitor with the New Zealand Inland Revenue Department.

He practices tax law predominantly advising Asia Pacific businesses entering into Australia and New Zealand.

Mr Prasad said he also regularly advises developing countries setting up their tax systems and training their tax departments.

Mr Prasad seems really passionate about his career and indeed is quite successful. But when asked if he could have done anything differently in his career, he feels he should have studied economics more at university.

“The Global Financial Crisis changed the business world forever and a greater knowledge of economics would have helped to understand the causes of the crisis and the solutions for it,” he said.

What are your views of Fiji’s taxation laws?

A successful tax system gets two things right. Firstly, the tax laws should be as simple as practicable and without undue complications. The more complicated tax laws are, the more costly it will be for taxpayers to comply with their tax obligations. In this regard, Fijian tax laws appear to achieve a good balance. Secondly, the tax administration laws must be fair to both parties involved (FRCA and taxpayers).   In Fiji, the tax administration laws are contained in the Tax Administration Decree 2009 which sets out the rights and obligations of FRCA. It also sets out protections provided to taxpayers when dealing with FRCA.

Apart from the tax laws, the conduct and attitude of the tax department is also very important in determining how the tax laws are doing. One of the pleasing aspects of Fijian taxation is that FRCA has shown a very co-operative attitude towards compliant taxpayers.

But tax administration will always involve two competing interests – FRCA has its targets and taxpayers will want to pay as less tax as legally possible. FRCA has its team of auditors and lawyers to determine their position as to how much taxpayers should pay. Fijian taxpayers need to ensure they have adequate representation to protect their interests.

In terms of tax laws, is Fiji on par with the more developed countries?

Tax laws are constantly in a state of flux. Very seldom will you hear the tax system of a developed country is perfect. The American tax code, for system, is often criticised for being overly cumbersome and is in urgent need of fixing.   The more developed a country is, the more complex its tax system will become.

Tax systems of developing countries are currently facing two big challenges from globalisation and digitisation of the world economy.   With globalisation, capital flows more freely and it becomes difficult to pin where taxation can take place. With the digitisation, companies such as Google are able to effectively wipe out their world-wide tax liabilities.

At the moment, it does not appear the Fijian tax system is experiencing such structural pressures. However, as the Fijian economy advances further, these issues will start to creep in here as well.

What are some of the advantages of our tax laws?

International tax experts note that an ideal tax system is one which is comprehensive and is low rate. Overall, the tax laws in Fiji are quite comprehensive. However, there are a number of tax exemptions and allowances which are aimed at increasing economic activity in certain sectors of the economy.

While this may be good for those sectors, past international experience (for example, New Zealand in the 1970s) has shown that increased exemptions and allowances may lead to tax avoidance activity. No doubt FRCA has its eyes on curbing any such activity in Fiji.

The VAT laws are relatively modern and seem to be working well. Fiji is one of the few countries where VAT tax take is higher than income tax.

Currently many countries such as Australia are struggling to maintain their VAT base due to the popularity of on-line buying. Most consumer goods are able to be imported into the country VAT free and this has lead to major retailers losing business. It is likely that VAT laws in these countries will be changed to counter the VAT tax erosion. Fiji’s healthy VAT intake seems to indicate the problem is not very prevalent here.

Is there a need for more tax specialists in Fiji?

As the Fijian economy becomes more advanced, tax issues will become more complex. One such example is the increased number of companies wanting to list on the stock exchange. These commercial transactions may involve highly complicated tax issues. Fiji is also moving towards self assessment taxation – which means taxpayers are solely responsible for getting their tax assessments correct. If they get it wrong, it may have adverse implications – penalties may be imposed. Getting binding rulings from FRCA is one way of managing risk and tax specialists can be handy in applying for a ruling.

We are always looking for promising and successful business stories to tell our readers. If you know someone who has something interesting to tell readers through HARD TALK, do send an email to:

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