Deep Dive

2020-21 National Budget: Fiji’s Road To Recovery

The Attorney-General and Minister for Economy, Aiyaz Sayed-Khaiyum, last night announced a $3.67 billion national budget for the financial year 2020-2021, aimed at the recovery of the Fijian economy after the outbreak of the COVID-19 pandemic.
18 Jul 2020 13:01
2020-21 National Budget: Fiji’s Road To Recovery
Prime Minister Voreqe Bainimarama and Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum outside Parliament last night after the Budget address. Photo: Ronald Kumar

A budget aimed at giving hope to the Fijian public was announced last night by the Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum. The $3.67billion Budget outlined a list of tax reforms, the biggest tax reforms announced ever in Fiji.

The Attorney-General and Minister for Economy, Aiyaz Sayed-Khaiyum, last night announced a $3.67 billion national budget for the financial year 2020-2021, aimed at the recovery of the
Fijian economy after the outbreak of the COVID-19 pandemic.

“Mr Speaker, we can’t settle for the timid pursuit of these priorities. This is not the time to retreat. This is not the time to stick our head in the sand and wait for this pandemic to disappear like a bad dream. We have to act, and half measures and baby steps won’t cut it – our recovery must be bold. It demands every ounce of administrative and political will within us and every dollar we can marshal to inject into the economy.”

Major tax reforms were announced.

“We can’t tax businesses like it’s a pre-COVID economy or act with false hope that we will return to one anytime soon. To brace for the “new normal” we’re announcing Fiji’s biggest-ever tax cut –– a discount of hundreds of millions of dollars, with strategic incentives across age-old industries as well as new arenas –– such as manufacturing and assembly –– which nations are looking to relocate to price-competitive locales.”

This tax cuts’ biggest savings are also targeted at tourism.

Major Tax Reforms:

  • 6 per cent Service Turnover Tax eliminated
  • $100 off the departure tax, from $200
  • 5 per cent reduction across the board on Environment and Climate Adaptation Levy, from 10 per cent.

The government will be working through Fiji Airways to provide the first 150,000 visitors with a once-in-a-lifetime travel stipend of around $400 per passenger to go towards tourism packages including flights, hotels and meals and beverages.

$3 million annually is now the threshold for reduced ECAL – more than double the previous amount of $1.25 million. So for mid-sized tourism operators and other businesses like restaurants, rental car companies and cafes, ECAL is dropping to zero.

“Together, these tax reductions alone represent –– valued at last year’s revenue collection –– $500 million; an unprecedented sacrifice of government revenue. But it’s worth every dollar to get these struggling Fijians back to work in the industry they love and rely on.”

This Fiji Recovery Rebate Package is a big, bold move –– to the tune of $60 million –– that aims to once again fill our hotels by creating attractive packages to safely escape the pandemic in paradise. It’s about more than the rapid revitalisation of tourism –– this has the potential rekindle the immense, far-reaching economic impact the industry has on Fijian families.

Budget Allocation for social services

Budget Allocation for social services

Other Tax reforms that are going down:

  • Stamp duty levied on mortgages for resident taxpayers was reduced from 1.75 per cent to zero, and stamp duty levied for foreign taxpayers was reduced from 5 per cent to zero in the COVID-19 Response Budget is now permanent.
  • All stamp duties are abolished. This will make transactions faster and cheaper for everyone. There are no longer any stamp duties on any government document –– from buying a house, a car or any hire purchases.
  • Elimination of the duty for all items under the Customs Tariffs Act 1986, including machinery, mechanical appliances and
    mechanical parts.
  • Reduction of fiscal duty to 5 per cent and eliminating import excise tax on a range of white goods, including air conditioners, refrigerators, televisions, washing machines, dryers, dishwashers, microwaves, lawnmowers, hairdryers, toasters, electric stoves and kettles, and smartphones.
  • Reduction of specific duty by  75 per cent on hybrid cars and non-hybrid cars.
  • Non-hybrid cars reduction in fiscal from 15 per cent to 5 per cent.
  • Duty-free for new air-bag trailers for trucks.  Buyers can access a $20,000 grant towards their purchase.
  • Removal of all excise duty on non-hybrid cars. There’s no restriction on age for vehicles to qualify for these exemptions, but all non-hybrid cars must meet Euro 4  Fuel standards.
  • Cutting of customs duties on over 1,600 items including toothbrushes to spectacle lenses, to life jackets, life belts and fire alarms to laundry detergent; to exercise books; to hygiene products like deodorant and shampoos; to food items, like tomatoes, jams, soy sauce, salmon, sardines, cereals, sweet biscuits, potatoes, chocolates, pasta, baking powder and peanut butter; and other tourism-related equipment.
  • 100% tax deduction on reduced commercial rents by landlords from 1 April 2020 will now be extended until 31 December 2021.
  • Businesses who invest in new subdivision projects for both residential and commercial lots will not only have duties waived on construction inputs, they can access up to 60% in tax deductions. And any profit they make selling the newly developed lots will be tax-exempt.
  • A 150 per cent tax deduction will be available to all hotels and restaurants who hire local artists, such as musicians, dancers and craftsmen.Budget Allocation for social serviceTaking BOLD STEPS to recovery

Mr Sayed-Khaiyum outlined the Government’s three main focus:

  1. We need to bring back jobs. Particularly in tourism, that begins with bringing down taxes.
  2. So long as this pandemic remains, so must our safety net for those who are unemployed and those whose hours and salaries have been cut.
  3. Lastly, to stop this economic fallout from doing permanent, structural damage, we must fill the void of falling investment and consumption with a strategic and sustainable government stimulus. In doing so, we must get Fiji building again, get Fiji working again, sometimes in new ways, and bring Fiji’s economy back across a broad front.

Edited by Naisa Koroi

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