NEWS

Bringing Down The Big Black Economy

The term black economy, for most laypeople, conjures images of illicit alcohol sales in infamous corners of Toorak, Raiwai, Vatuwaqa and Nadonumai in Suva. In fact, it’s more sophisticated than
08 Jul 2015 08:07
Bringing Down The Big Black Economy

The term black economy, for most laypeople, conjures images of illicit alcohol sales in infamous corners of Toorak, Raiwai, Vatuwaqa and Nadonumai in Suva.

In fact, it’s more sophisticated than that and the Bainimarama Government has put in measures to deal with the causes and the effects of these unregistered activities.

According to the World Bank, the black or shadow economy is ‘all currently unregistered economic activities that contribute to the officially calculated (or observed) Gross National Product.

Another definition is the “market-based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP.”

Another definition suggested by the World Bank is “…those economic activities and the income derived from them that circumvent or otherwise avoid government regulation, taxation or observation.”

In Parliament yesterday, Attorney-General and Minister for Finance Aiyaz Sayed-Khaiyum referred to the 2010 Report by the World Bank titled ‘Shadow Economies of the World: New Estimates for 162 countries from 1999 to 2007.’

The report estimated that the size of the Fijian shadow economy was 32.4 per cent of GDP. This, Mr Sayed-Khaiyum said resulted in $2.8 billion dollars not being accounted for during this period.

He was responding to a question from Government MP Sanjit Patel on whether there was a ‘black economy in Fiji’ and how extensive it was.

In response to a supplementary question from Government MP Lorna Eden on possible remedies, he said the Government had worked on several fronts to reduce the Fijian black (shadow) economy:

 

  • Tougher punitive measures against offenders like increased fines
  • Declaration of assets by political parties and members
  • A new Company’s Act strengthening enforcement
  • Simplication of tax laws and decision-making process
  • Deregulation of sectors like rental car services

 

In the 2010 World Bank report, the driving forces of most shadow economies were:

 

  • Increased burden of taxation
  • Labour market regulations
  • The quality of public goods and services
  • The state of the“official” economy.

 

Mr Sayed-Khaiyum also pointed some of the reasons why businesses resorted to the shadow economy. These were detailed in the 2010 World Bank Report.

 

  1. To avoid payment of income, value added or other taxes,
  2. To avoid payment of social security contributions,
  3. To avoid having to meet certain legal labor market standards, such as minimum wages,maximum working hours, safety standards, etc., and
  4. To avoid complying with certain administrative procedures, such as completing statistical questionnaires or other administrative forms.

In response to Mr Sayed-Khaiyum’s explanation, NFP leader Biman Prasad requested more scrutiny by the relevant authorities for unexplained wealth. Mr Sayed-Khaiyum said declaration of assets off-shore would also come under a new tax regime, more compliance from companies and individuals would be enforced and FIRCA was also using special audit teams to expose illegal activity.

Other questions on the issue were from SODELPA Semesa Karavaki who asked if there was any disparity between Minister’s salaries that were recorded and those that were actually received. Mr Sayed-Khaiyum said that all salaries for the President, Speaker of Parliament, Prime Minister and all parliamentarians were governed by law. He said the salaries would soon be under the scrutiny of the new Parliamentary Emoluments Committee, that was endorsed on Monday by both sides of Parliament.

Feedback: josuat@fijisun.com.fj

 


Get updates from the Fiji Sun, handpicked and delivered to your inbox.


By entering your email address you're giving us permission to send you news and offers. You can opt-out at any time.




Five Squares Mad March


Fijisun E-edition
Total
Subscribe-to-Newspaper
Fiji Sun Instagram
Subscribe-to-Newspaper