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FRCA: Service Fee Can Distort Turnover Tax

Fiji Revenue and Customs Authority says the introduction of a Service Fee for tourists would impact the entire Service Turnover Tax Base. FRCA National manager Policy, Economic Analysis & Research,
06 May 2015 10:08
FRCA: Service Fee Can Distort Turnover Tax

Fiji Revenue and Customs Authority says the introduction of a Service Fee for tourists would impact the entire Service Turnover Tax Base.

FRCA National manager Policy, Economic Analysis & Research, Fazrul Rahman, said: “It can distort the Service Turnover Tax regime due to dual rate of tax.

“Tax cascading, if allowed, will lead to double taxation, additional compliance cost of business especially for small-medium enterprises/small hotels in the tourism sector.”

Mr Rahman was presenting before the Parliament Standing Committee on Economic Affairs yesterday.

SODELPA Parliamentarian Viliame Gavoka has given a petition to introduce a Service Fee for tourists.

The Service Fee is proposed to be charged to all guests/client bills for the purposes of supplementing the incomes of tourism industry workers in Fiji.

He says the authority’s policy advice on the proposed Service Fee for tourists is to consider efficiency, equity and simplicity principles at tax policy design stage.

Mr Rahman said designing a tax requires analysis of all issues.

“Tax has distortionary effect on the economy and the goal of any tax policy is to generate maximum revenue with lease welfare loss,” he stated.

He said some of the tax design issues would be the rate of tax, the tax base and the tax cascading.

Some of the broader economic policy issues which one would need to be mindful of, he said, was workers earning up to $16,000 do not pay income tax.

“Workers benefit from current fiscal stimulus so workers save,” Mr Rahman said.

“Workers benefit from VAT zero rating of basic food items along with price controlled items.

“Workers benefit from two per cent additional Fiji National provident Fund paid by employers.”

Mr Gavoka proposed this could be pursued in other ways.

Feedback: rachaeln@fijisun.com.fj

 



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