Tourism body warns 5% tourism tax will hurt Fiji's competitiveness

The Fiji Hotel and Tourism Association (FHTA) has rejected the Government's claim that the tourism industry broadly supports a proposed five per cent tourism services tax to help fund Fiji Airways, warning the levy would increase costs, hurt competitiveness and was announced without proper consultation.

The proposed tax was announced in the 2026-2027 National Budget as part of a package to support the national airline, which has come under financial pressure from rising fuel costs and its post-pandemic recovery.

FHTA chief executive officer Fantasha Lockington said suggestions the industry had agreed to the measure were inaccurate.

"While a few representatives may have expressed support in isolated discussions, they do not represent the wider industry. The overwhelming majority of FHTA members strongly oppose the tax in its current form and the lack of consultation before its announcement," she said.

Ms Lockington said the financial burden should not fall solely on the tourism sector, which was still grappling with COVID-19 debt, rising wages, labour shortages, infrastructure pressures and increasing operating costs.

"Operators cannot simply return to guests, agents, or wholesalers to recover another five per cent without risking disputes, cancellations, destination and brand reputational damage or margin loss.

"Contracted rates, deposits and payments are legally binding and commercially locked in. Any attempt to retroactively add costs would breach agreements and undermine confidence in Fiji's tourism product."

She said members had indicated they would likely pass the tax on in full because absorbing the additional cost was not commercially sustainable.

The association warned that adding the five per cent tourism services tax to the existing 12.5 per cent value-added tax would create a 17.5 per cent tax burden on affected tourism services before the existing $200 departure tax was taken into account, potentially affecting Fiji's competitiveness.

FHTA said if the Government's objective was to raise revenue for a national purpose, a broader national funding mechanism would be more equitable than placing the burden on tourism operators alone.

If the tax proceeds, the association has called for safeguards, including exempting existing contracted, deposited and paid bookings, ensuring the tax is not applied retrospectively, adopting VAT-style input and output treatment to avoid cascading costs, and making the tax administratively clear.

It also wants the legislation to include a sunset clause of no more than 12 months, with all revenue ring-fenced, independently audited and publicly reported. FHTA further proposed allowing tourism operators to establish a special purpose vehicle so tax contributions could be converted into equity in Fiji Airways.

Ms Lockington said any support for Fiji Airways should be based on national participation and accountability.

"Tourism operators cannot be asked to provide a one-way transfer without clarity, accountability and a fair mechanism. The tourism industry has not agreed otherwise," she said.

Business owners

Aamira Restaurant owner Hafiz Rahiman said operators were unlikely to absorb the tax.

"I don't see how any operator affected by the five per cent tax will absorb the cost — essentially a five per cent tax on the top line. Prices will spike and, with the economies of the primary tourism markets under pressure, price increases will impact demand."

Property Experts director Jonny Singh supported Government assistance for the airline.

"Support local airline."

Tourism budget

In his Budget address, Finance Minister Esrom Immanuel said Government would provide a $200 million guarantee for Fiji Airways and extend the airline's loss carry-forward provision from eight years to 15 years, while also waiving about $10 million in fees and charges for the next 12 months.

He said Government was also working with Fiji Airports, Air Terminal Services, the Civil Aviation Authority of Fiji, the Fiji National Provident Fund and the Fiji Development Bank to ease financial pressure on the airline.

"The tourism industry has also come on board to support the airline and has broadly supported a temporary five per cent tourism services tax on all hotels and tour and cruise operators with an annual turnover of $2 million or more for the next 12 months," Mr Immanuel said.

"The revenue generated from this five per cent tourism tax will be ring-fenced and fully directed to Fiji Airways. The industry has broadly agreed that the burden of the tax will be largely absorbed by hoteliers and tour and cruise operators and not passed on.

"The five per cent tourism tax will be effective from September 1, 2026, and is expected to generate around $70 million for the airline."