Read A-G’s National Budget address in full
‘Fiji’s economy has grown at a steady rate above three per cent –– on average –– over the past ten years, but the strength of past revenues won’t cure COVID-19’s impact on our economy. Even if we could afford one, there is no vaccine yet to buy. There is no magic pill that will instantly revive Fijian tourism when there are no tourists on the planes. we’re dealing with a oncein-a-century external shock to our economy, to livelihoods and to the global financial system.’
Honourable Speaker, Honourable Prime Minister, Honourable Leader of the Opposition.
It is my privilege to present to Parliament and to all Fijians the National Budget for the 2020-2021 fiscal year.
Mr Speaker, I would like to begin by thanking God that Fiji is free from the grips of COVID-19 outbreak. Far removed in our patch of the Pacific, it’s difficult to grasp how unprepared the world was for this pandemic. On March 26, when we delivered our COVID-19 Response Budget, global cases stood at just over half a million –– today that figure is exceeded by fatalities from COVID-19 alone and total infections stand at nearly 14 million. Were it not for our decisive actions, Fiji’s most vulnerable citizens could be among the hundreds of thousands dead or dying from this disease.
Our COVID-19 Response Budget, which we announced one week after our first case, allocated all the resources we could muster to beating the virus and bracing for a historic financial blow. Of course, this meant a complete reordering of priorities and the postponement of some important projects. But it was unavoidable; any other path would have been irresponsible and unsustainable.
So, what have we accomplished? Through a world-leading testing and contact-tracing campaign, we are a COVID-contained country. Excluding a handful of cases confirmed among returning citizens, who have been confined securely in Government-funded quarantine facilities, Fiji is 90 days removed from our last case of the virus. Families in Fiji are safe, and our record on testing ranks ahead of the rest of the world, right alongside New Zealand and Australia.
But even if Fijians aren’t fighting for their lives attached to ventilators, many of our most important industries have been victims of the most severe global recession in a century; a COVID-fuelled collapse for which no nation was prepared.
Global Economic Outlook
Mr Speaker, I’m not here to sugarcoat anything this evening. Since the announcement of our COVID-19 Response Budget, the world economy has fared far worse than we ever feared. Global growth projections have been revised down further to a five per cent contraction –– the sharpest fall in one hundred years. Any recovery is predicted to be partial and uneven, with muted projections anticipating up to a five-year comeback cycle. Over 300 million jobs have been lost worldwide. Just imagine, the equivalent of our entire population more than 300 times over, all unemployed around the world. And another 1.25 billion jobs are at serious risk. In the tourism sector alone, the “Great Global Lockdown” could result in losses of upwards of 3.3 trillion US dollars. Even major developed economies are headed for double-digit declines in GDP.
But this economic devastation is not equally shared. Through no fault of our own, countries like Fiji are caught in a perfect storm –– a health crisis that has birthed an economic catastrophe, both of which arrive on the heels of a climate emergency. Most recently, in the form of Cyclone Harold.
We cannot look to history for a ready-made response to COVID-19. Killer diseases like SARS, H1N1 and Ebola never descended on humanity like the coronavirus. The worst economic hardship of the global financial crisis of 2009 was outpaced by COVID in a matter of weeks. And even record-shattering cyclones –– like category 5 TC Winston –– while devastating, eventually blew past us. The winds of the coronavirus hurricane, however, still have not relented, nor will they in the near future. It will fundamentally change the future –– indeed, it already has.
Fiji’s Economic Outlook
Mr Speaker, before the pandemic, we were expecting to see tourism numbers climb in 2020 –– we were expecting to welcome a number of tourists that matched the number of Fijians. But with international passenger flights grounded, tourism revenues have evaporated. That’s 40 per cent of our GDP lost in a matter of days, or even hours, and the ripple effects have dropped Fiji’s economic activity to its lowest level ever.
Remittances are projected to fall by 15 per cent as other economies see serious declines. Foreign Direct Investment is projected to slash by 40 per cent. Our once-thriving garment-makers have seen orders halted and supply chains disrupted. Driven by this global fallout, we’re now projecting the single largest economic contraction in Fijian history, some 21.7 per cent. Already, 115,000 Fijians –– one third of our workforce –– have had their hours reduced or lost their jobs entirely.
Fiji’s economy has grown at a steady rate above three per cent –– on average –– over the past ten years, but the strength of past revenues won’t cure COVID-19’s impact on our economy. Even if we could afford one, there is no vaccine yet to buy. There is no magic pill that will instantly revive Fijian tourism when there are no tourists on the planes. We’re dealing with a once-in-a-century external shock to our economy, to livelihoods and to the global financial system. So, no, we can’t lean on past economic success –– record-breaking as it may have been. No nation can, including developed nations like Germany and the United States, both of whom are mired in economic recession after their longest periods of economic growth. As is our neighbour, Australia, whose recession-free streak of nearly 29 years was shattered by this pandemic within months.
Mr Speaker, when we imagine a victim of COVID-19, we may picture a grandparent, bed-ridden in an overcrowded ICU saying final goodbyes to loved ones over the telephone. Those stories are real, they are gut-wrenching, and we should thank God that Fijians have been spared that experience. But our medical experts will be the first to tell you: economic collapses can tax human wellbeing as heavily as any disease.
I’m talking about the hard-working people made redundant at jobs they worked for decades; Fijians with families to feed whose incomes have now disappeared. Fijians whose shops have been shuttered and whose life-savings are in jeopardy. These breadwinners and business owners are victims too, and their government knows it.
If we don’t, Mr Speaker, and if the global lockdown persists and borders remain closed, wounds to both our economic prospects and our people’s wellbeing will scar permanently. Barring drastic intervention, our economy may never fully recover; not this year, not next year, not decades on from now. That’s what is at stake; not only our economy, but our children’s economy –– not only our jobs, but the quality of employment available to coming generations. Mr Speaker, let me say now: we will not fail those most vulnerable today, nor will we fail those future Fijians. Mr Speaker, disasters have a way of distilling priorities. We juggled a great many uncertain and evolving dynamics in this budget, but through the great many difficult decisions we’ve made, we were guided by a simple set of principles:
Number One: We need to bring back jobs. Particularly in tourism, that begins with bringing down taxes.
Number Two: 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.
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.
COVID-19 Response Budget
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.
The stimulus announced as part of our COVID-19 Response Budget was an important start.
To date, we’ve worked with our financial sector to restructure over $3.4 billion in loans, freeing businesses and families from mandatory monthly loan repayments. 86,000 Fijians accessed relief payments from their FNPF General Accounts in Phase 1 of our unemployment benefits scheme, with another 26,000 accessing relief payments in Phase 2. Over $62 million has been paid out to the affected Fijians, with the Government stepping in with around $12 million to top-up accounts to ensure that full payments were delivered to all who qualified. And the third phase of unemployment relief –– which I’ll soon detail –– will be funded by government with another $20 million.
COVID-Safe Economic Recovery
The COVID-19 Response Budget paved the way for Phase 2 of our COVID-Safe Economic Recovery Framework; a nuanced approach to resuming economic activity. Thanks to the launch of that comprehensive framework, life feels more familiar for all of us. People are once again heading to markets supporting local vendors; attending sporting events and cheering on homegrown talent; and gathering in houses of worship to seek solace in faith and community. Many hotels have begun looking locally through the “Love our Locals” initiative. We’ve received thousands of applications through our new micro entrepreneur initiative from Fijians looking to re-purpose specialised skill-sets to set up businesses of their own, and thousands more for our concessional micro, small and medium enterprise loans. Others are turning to their land, planting produce to feed themselves, sustain their families and earn an income.
Mr Speaker, uplifting local businesses and unlocking our full potential at home will go a long way. But the reality of the matter is that we aren’t a big enough country to build a recovery solely off domestic consumption. Our comeback hinges on holding our place in the
‘Mr Speaker, Fiji’s overly-complicated customs system has put too much discretionary power in the hands of Customs oFfiCErs which leads inevitably to inconsistency and uncertainty and corruption. I’m sure many importers have found themselves at the mercy of a customs oFfiCEr ImBuED wItH the subjective –– and corruptible –– power to decide which vaguelyDEfinED Duty tHEIr goods will attract. It’s not a system suited to An EFfiCIEnt EConomy, and we’re scrapping it.’
global economy; a position we have worked for years to establish.
For a start, we need visitors.
In a usual year, Aussie and Kiwi tourists hop on flights around the world to make around 12.5 million trips overseas. Fiji usually captures a sliver of that tourism action; 4% and 6% of the Australian and New Zealand out bound markets, respectively. Well, Mr Speaker, the world is closed, and it will be for some time. Oceania, on the other hand, is one of the few regions that can reopen, and Fiji is one of the few nations with the healthcare capacity, border controls and proven record of COVID-Containment to restart international tourism. For those good reasons, the United Kingdom recently removed any quarantine requirement for travellers to and from Fiji –– a huge vote of confidence in our handling of this pandemic that we hope other nations will follow.
After taking the first step with the “Bula Bubble”, we’re in trilateral discussions to restart travel between Fiji, New Zealand and Australia. So now, as New Zealand’s success against the virus has them on the fastrack to COVID-Contained status, Fiji will soon drop any quarantine requirement for New Zealand-based travellers.
Yesterday, the first yacht arrived to Fiji through our new “blue lanes”, which allows passengers to conduct 14 days of quarantine at sea, with another over 100 yachts and superyachts already headed to Fiji. And our “Pacific Pathways” are already open to travellers from Kiribati, Tonga and Tuvalu into Fiji. Our growing film and television industry is being safely resumed, with beloved shows like Survivor set to continue. Our exemptions of exceptional economic value are also safely bringing back vital jobs and money into the country, with more expected to follow –– we’ve received a number of applications that would breathe new life, and new jobs, across industries and sectors. Several high-net worth individuals have taken us up on our offer to “escape the pandemic in paradise”. We’ve even seen interest by a company looking to not only come to the country to resume operations, but publicly list on SPX; so there lies great potential for those looking to take advantage of existing incentives to list in Fiji and even base their headquarters here. Speaking of the SPX, Mr Speaker, we’re offering a 150% tax deduction for companies who list corporate bonds on the SPX, with another 150% deduction allowed on interest paid on corporate bonds. Any interest income will also be tax exempt. These innovative approaches can help capture massive market and investment opportunities. But just because it’s safe to travel doesn’t mean people will travel –– but if the deals are good enough, we’ll fill the planes. Government is prepared to empower our national carrier and hoteliers to offer visitors those irresistible opportunities, but our tourism operators must match that commitment by adapting to the “new normal” both in safety and in sales.
That model –– that mix of government commitment and business creativity –– must define Fiji’s recovery from COVID-19. It is the surest way we allow Fijians to swim sustainably, rather than just be kept afloat. But if we want to make the best possible partner out of Fijian businesses, in tourism and otherwise, we cannot price or tax our way to recovery.
Tax Reforms
That’s why, in this year’s budget, sweeping tax reform is front and centre. To call it “reform” in itself is an understatement; this year represents an overhaul –– one that will be vital to driving new economic activity.
Over the past decade we’ve thoughtfully structured a tax regime suited to an open, globally integrated economy. We’ve cut corporate and personal income tax rates, reduced VAT, and raised the personal income tax threshold. We raised stamp duties and departure taxes, as well as taxes on alcohol and tobacco. We introduced STT and ECAL, along with a social responsibility tax for those earning more than $270,000 annually.
But, Mr Speaker, 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.
But this tax cut’s biggest savings are also targeted at tourism.
As part of this year’s now-routine budget consultations, we held a number of intimate sessions, oneon-one meetings, and open calls with tourism stakeholders. And while these consultations have become a tradition since this government introduced them, as we all well know, there is nothing traditional about this year.
When our tourism operators talked about their anxieties from this pandemic, we knew we couldn’t settle for small tweaks –– we needed a revolution of our tax regime. Every aspect of how tourism operators earn revenue and find margins has been rethought and reworked to get this industry off the operating table.
Number one: we are eliminating the 6 per cent Service Turnover Tax.
Two: we’re reducing the Environment and Climate Adaptation Levy from 10 per cent to 5 per cent across the board.
Three: we’re shaving $100 dollars off the departure tax.
For the reduced ECAL, the turnover threshold is now $3 million annually –– 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. Apart from the reduction in taxes, the Government will be working through Fiji Airways to provide the first 150,000 visitors with a once-ina-lifetime travel stipend of around $400 per passenger to go towards tourism packages including flights, hotels and meals and beverages. This Fiji Recovery Rebate Package is a big, bold move –– to the tune
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‘We don’t know when the Bula Bubble will come into effect; while we created the proposal to fast-track tourists to safely enter the country, its implementation will require cooperation by our counterparts in Australia and New Zealand. When both will become COVIDContained, we hope that they –– like the United Kingdom –– see that Fiji’s success against COVID merits the removal of their own quarantine requirements for visitors returning from Fiji.’
The following is the 2020-2021 National Budget Address by the Attorney-General and Minister for Economy Aiyaz SayedKhaiyum made on July 17, 2020 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 to rekindle the immense, far-reaching economic impact the industry has on Fijian families.
We’re halving excise taxes on alcohol –– a 50 per cent reduction that will allow our hotels, resorts, bars and restaurants to pass on those savings directly to consumers. Market Survey has shown that Fijian resorts and hotels can be overpriced, especially when it comes to food and beverage services. As an immediate effect of these tax cuts, we expect the price structures for rooms, food, alcohol –– basically everything –– to drop precipitously. And tourism operators should consider making these changes to their cost structure permanent. So, as Fiji looks to safely reopen to tourists, our hospitality industry can even get creative with all-inclusive options that allow us to be costcompetitive with destinations like
Bali and Phuket, when they open for businesses, they will do so with a vengeance!
Mr Speaker, we’re also making some ground-breaking, economywide changes to the tax code.
Starting with stamp duties:
In the COVID-19 Response Budget, 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. That reduction –– set to expire on 31 December 2020 –– is now permanent. But we’re going much further, all stamp duties are hereby abolished; making transactions faster and cheaper for everyone. That broad-based change means there are no longer any stamp duties on any government document –– from buying a house, a car or any hire purchases, that financial burden has been eliminated for good. Mr Speaker, when it comes to customs duties, we are building an entirely new tariff structure; one centred around simplicity and liberal trade, with a special focus on cutting costs for the tourism sector and making life more affordable for ordinary people.
In the past, equipment could be zero-rated on an ad-hoc basis through a bogged down bureaucratic process. No longer. Goods that cannot be manufactured in Fiji are seeing massive duty reductions, with customs duties falling to five per cent, and zero per cent in some cases: We’re eliminating the duty for all items under the Customs Tariffs Act 1986, which includes machinery, mechanical appliances and mechanical parts;
We’re reducing 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, lawn mowers, hair dryers, toasters, electric stoves and kettles, and smartphones.
We are reducing the specific duty by 75 per cent on hybrid cars and non-hybrid cars. In addition, for new, non-hybrid cars we are reducing the fiscal from 15 per cent to 5 per cent. Lastly, on all non-hybrid cars, we are removing the excise duty. There’s no restriction on age for vehicles to qualify for these exemptions, but all non-hybrid cars must meet Euro 4 Fuel standards. The luxury vehicle levy has also been removed and the Accident Compensation Levy has been halved through the next year.
And new air-bag trailers for trucks –– which are much gentler on our roads –– are not only duty-free, buyers can access a $20,000 grant towards their purchase. Used air-bag trailers will now only attract a 5 per cent duty. By getting these more agile vehicles on our roads, we actually keep our roads from deteriorating. We’re thankful to those trucking companies which are complying with our road loads.
That’s not all. We’re cutting customs duties on over 1,600 items –– from toothbrushes to spectacle lenses, contact lenses and artificial eye solution; to testing equipment for businesses to help lower production costs; to life jackets, life belts and fire alarms to strengthen public safety; 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 on to other tourismrelated equipment. On over 1,000 items duties are falling to five per cent or zero per cent, and on more than 500 items, duty is falling from 32 per cent to 15 per cent.
I’ve got the full list here with me…. I’d read it all tonight, but that would keep all of us out past curfew. In fact, we could be here until sunrise. Instead, you can find the full list of goods published as part of the budget supplementary documents on the Ministry of Economy’s website.
I urge everyone watching, take advantage of this duty-discount of the decade.
Mr Speaker, we’re also reassessing some protectionist tariff measures which have already served their purpose of granting local manufacturers time to become more competitive. Many of these measures have long expired their best-buy date and have become marketdistorting; putting out low-quality products at gouged prices.
We know there are some businesses who have made massive investments in local manufacturing. So long as these companies are hiring large numbers of people and producing high quality goods, we’ll be flexible. But through a review of these measures through the next year, for the most part, we’ll have our eyes set on further liberalisation, meaning lower prices and higher quality products on shelves across Fiji. In that aim, all personal imports will now be duty-exempt up to $2,000.
Mr Speaker, Fiji’s overly-complicated customs system has put too much discretionary power in the hands of customs officers which leads inevitably to inconsistency and uncertainty and corruption. I’m sure many importers have found themselves at the mercy of a customs officer imbued with the subjective –– and corruptible –– power to decide which vaguelydefined duty their goods will attract. It’s not a system suited to an efficient economy, and we’re scrapping it. Duties are now going to be far more general, without any room for guesswork. Just to be certain, FICAC has been funded with $8 million in the next financial year to keep our public officials and the private sector honest when engaging with these new rules.
Mr Speaker, businesses benefitting from these massive reductions should know: Your nation needs your generosity not your greed. Your profits should be felt by your employees, both those still working and those you now can bring back after letting go. And customers need to see the cost-savings from this wholesale customs-restructure. If you’re running a supermarket, or an auto dealership, or an appliance warehouse, your prices must reflect these supply side discounts, and that’s not a request. If they don’t, you can expect to hear from the FCCC, which has been empowered to enforce a new range of compliance.
As for business-friendly measures announced in the COVID-19 Response Budget:
The payment of advanced corporate taxes is now permanent.
The implementation of the VAT Monitoring System will be extended until 1 January 2022.
The debt forgiveness provision will be extended to 31 December 2021 to grant businesses another full calendar year of flexibility. Following the suspension of thin capitalisation rules through 31 December 2020, the thin capitalisation ratio will now permanently increase to 3:1.
All residential rents, regardless of turnover, are now VAT exempt and we are removing the VAT Reverse Charge on supplies received from abroad.
The depreciation write-off incentives for fixed assets up to $10,000 is now permanent. As will be the 100
per cent write-off for the construction of commercial and industrial buildings, so there’s no need to seek provisional approval by year’s end. The provision allowing landlords to claim tax deductions on the sum for any reductions made in commercial rent will be extended an additional year, to 31 December 2021. The reduction of mandatory employer and employee FNPF contributions to 5 per cent will be extended through 31 December 2021. All employers who go beyond the call of duty and contribute more than 5 per cent up to 10 per cent, will be given a generous 150 per cent tax deduction backdated to 1 April 2020. This additional contribution will be exempt from taxes for employees.
To further incentivise employers to go that extra mile for their employees, we’re making fringe benefits offered by employers tax exempt.
To keep things simple for the “telcos” and support our longstanding commitment to streamline the sector’s regulations, the data levy introduced last year and the telecommunications service licensing fee have been replaced with a single 2 per cent revenue-based telecommunications licence fee. Half of a percent of that new, simplified fee will go into an existing trust fund set aside for the continued development of Fiji’s telecommunications industry, allowing us to further cement our standing as the ICT hub of the Pacific. I’d like to personally thank our telecom companies for their active participation in shaping this policy.
We’re also streamlining the tax code around depreciable assets to allow assets to be taxed at 10 per cent of Capital Gains Tax rather than 20 per cent of income tax. And we’re making ourselves a manufacturer’s destination of choice with new incentives to tap into international eagerness to relocate assembly and manufacturing lines to Fiji, including through continued support towards the establishment of a Special Economic Zone in Navutu which we’re developing in partnership with the FNPF and IFC to lay the groundwork for a tailor-made manufacturing facility which can be adapted to suit a variety of manufacturing purposes.
Ease of Doing Business
Mr Speaker, with this tax overhaul, businesses have never been freer to try fresh and innovative ideas, reconsider their margins, and get creative with how they operate. But there are other ways –– newfangled ways–– government can enlist the full participation of the private sector in our recovery. Last year, we embarked on a mission to cut through the red tape of starting a business. The fixes we’ve already made have cut the business licensing process from around 40 days to 48 hours –– but with so many Fijians looking to put employable talents to use starting businesses of their own –– two full days is still too long.
Mr Speaker, business licences have been around for nearly all of Fiji’s history. Were they introduced any earlier, we could label them a colonial relic, because –– stale with bureaucracy –– that’s what they resemble. In fact, they are a colonial relic. They are an unnecessary drain on time and money in a modern economy. That’s why when we sat down to look at how to fix the process, we couldn’t escape the burning question: Why do we need these licences at all?
So, 1 August 2020 will mark the end of Fiji’s business licence regime. To start a business in the next financial year, you can complete an easy, online business incorporation and tax registration, then you’re in business –– it’s that simple. There’s no longer a need to fork out the money or the time it takes to obtain a business licence.
Now, there is some guidance around this. Once they’ve registered with the Companies Office, low-risk businesses –– take, for example, a shoe store –– can open their doors and start selling to customers immediately. Other higher risk businesses, which involve people’s health, such as restaurants, will need to tick a few more regulatory boxes before starting operations.
The philosophy behind this move is important. This more efficient approach puts us in a league with highly-developed economies, like New Zealand, that don’t require business licences, but instead focus their time and energy on the compulsory registration of all businesses. So now, rather than standing between entrepreneurs and their enterprises, regulators will be focussing on enforcement. And rather than forcing business owners to seek innumerable and oftentimes irrelevant approvals to begin business, they will only need to tick the regulatory boxes that suit their industry over a more reasonable timeline. Behind the scenes, the Registrar of Companies, the National Fire Authority, OHS, the Central Board of Health, and others will be coordinating that national effort to enforce compliance. But we’re not going to waste their resources double-checking the same regulatory boxes. If a business sets up in a building which has already been certified by the relevant authorities, there’s no need for them to obtain new certifications for already-approved operations.
Now, to be perfectly candid, we’ve long questioned the methodology behind how the World Bank determines its Ease of Doing Business Index –– though we certainly expect these moves to augur well for Fiji’s ranking. We’re not doing this because some international expert recommended it, we’re doing this because businesses in Fiji have asked for it and, once again, we’re doing more than just listening, we’re acting.
Now that we’ve removed business licences, we’re injecting $200,000 in budgetary support to smaller municipal councils to make up lost revenues.
And, Mr Speaker, once you’re actually in business, we can’t let a spectre of massive tax penalties lock a ball and chain around activity. Over the years, we have sent a strong message with high payment penalties for late tax payments, and as a result, we’ve witnessed a culture shift towards more timely payments. We’re now at a point where we can comfortably ease up on penalties. In the next financial year, the penalty for late tax payment is being slashed from up to 300 per cent to 15 per cent annually.
Mr Speaker, we’ve never lifted so many taxes and regulations so quickly, and we want businesses to act fast to take advantage –– but first, make sure you read up carefully on what is allowed.
Mr Speaker, these measures may be targeted at employers, but its people –– both employees and consumers –– who will see the greatest good. Jobs will be sustained, more will be created, and the cost of living will drop driven by plummeting taxes and duties.
These are all key milestones on the road to recovery. But Mr Speaker, we can’t settle for recovering. We can’t settle for building back the same Fijian economy when so much has changed. In some ways we have to commit to rethinking and even rebuilding our economic fundamentals. The truth of the matter is that we have no idea how long this crisis will persist. No one does, and nations across the world are reeling with the fallout. Ironically, the only thing certain about this pandemic is its uncertainty. We don’t know when the Bula Bubble will come into effect; while we created the proposal to fast-track tourists to safely enter the country, its implementation will require cooperation by our counterparts in Australia and New Zealand. When both will become COVID-Contained, we hope that they –– like the United Kingdom –– see that Fiji’s success against COVID merits the removal of their own quarantine requirements for visitors returning from Fiji. Because, Mr Speaker, half-priced drinks and cheaper flights won’t mean much if there aren’t Aussies and Kiwis here to sip cocktails and fill our planes.
So, Mr Speaker, while the private sector has never had a more important role to play, we can’t relegate all the fiscal heavy lifting to businesses by shutting the tap on public spending. Notwithstanding the
We will also continue supporting micro, small and medium enterprises through our highlyconcessionary loan packages. In addition to the $30 million set aside for this initiative last year, we are adding an additional $30 million this year. On top of the $3.4 billion in loan repayments already deferred, the Association of Banks have agreed to –– on a case-by-case basis –– extend loan deferments until 31 December 2020, and we’re grateful for flexibility they’ve granted the families and business still bearing the worst of this economic fallout.
uncertainty ahead, we know we will always need roads, bridges, and stronger schools –– the construction of which can employ Fijians today.
Completing a newly-built office complex or building new apartments isn’t dependent on whether our resorts are brimming with tourists. So while tourism tax cuts are inherently tied to tourism jobs, other vital industries must be kept afloat as we prepare for COVIDContained tourism to resume –– particularly when it comes to construction.
So, while we will make some strategic cuts in spending in the next financial year, that money can’t languish in government’s accounts. To further our COVID-Safe Economic Recovery, it must be spent right now, as soon as possible, bolstering businesses, continuing construction, and rejuvenating jobs any and everywhere possible, but particularly in sectors that are not tourism-dependent. In the meantime, those dollars will also go to government-funded relief which –– in many cases –– is all that’s standing between jobless Fijians and abject poverty.
In the 2020-2021 National Budget, we’re announcing a $2 billion direct government stimulus package to fund our comeback from COVID-19’s economic impact. In total, we’re projecting a $3.67 billion-dollar government spend through the next financial year, with revenues projected at $1.67 billion. So, our deficit will be steep –– at 20.2 per cent –– pushing our debt to GDP ratio to 83.4 per cent but, as we know, the costs of doing nothing are far steeper.
Like any sensible nation or business on Earth –– we will be borrowing to make up the remaining difference in revenue.
Mr Speaker, some weeks back we announced COVID-19 Concessional Finance Support Packages to aid Fijian-owned Micro, Small and Medium Enterprises worst affected by the pandemic. These are highly-targeted loans that ease the financial burden on enterprises until our economy makes its recovery. These businesses –– borrowing at extremely concessionary terms –– can immediately put funds to work readying their businesses for the day their revenues return.
When a government borrows –– responsibly –– it is no different. It’s an investment in our future. And when we can get loans at very concessional terms, we would be foolish not to seize the opportunity. This isn’t some debt trap; it’s the international financial system’s vote of confidence in the Fijian people and in our potential as a nation. Over the years, the word “borrowing” has an all too predictable response from those who know alltoo-little about modern economics, distorting the facts to politicise proven economic analyses. Rather than frame smart borrowing as an investment in our future, they claim it’s a burden on our children. But when we borrow prudently we allow our children to be educated, our communities to be connected to electricity, roads and jetties, and our economy to grow. Borrowing now to build for tomorrow means future generations can borrow less. And a growing economy with a skilled and educated workforce generates more than enough national wealth and tax revenue to repay debt and invest in the future. The “borrowing is always bad” narrative is not only wrong, it is entirely out-of-touch with how responsible governments have used debt to grow GDP –– without exacerbating inflation. And in times when misinformation and disinformation can literally cost lives, such ignorant analysis is especially dangerous.
Could Fiji have “saved for a rainy day” over the past decade? Yes, and we did. But the global COVID-19 pandemic isn’t some casual “rainy day” over Suva –– it is a cyclone of unprecedented proportions. Saving the sums necessary to combat this crisis would have meant withholding free education. Leaving thousands of Fijians without clean water and electricity. Increasing taxes, like VAT. Forfeiting free healthcare, and never aiding those who lost everything to Cyclone Winston. The Fiji of today would look like the Fiji of post-1987. The businesses and industries and young, bright Fijians that we have seen blossom simply wouldn’t exist; those Fijian success stories would never have been written, robbing hundreds of thousands of our people of their true potential.
Mr Speaker, it may feel like Fiji is alone in taking on this challenge –– but we aren’t. We have many friends, many of whom are in our same position. We’ve spent hours on video conference calls building a virtual coalition to challenge the global financial order to expand access to concessionary financing for the most COVID-vulnerable economies.
Our advocacy has added fiscal firepower to the coffers of emerging economies in the world over. In Fiji’s case, we have successfully raised funds externally from a wide range of multilateral development banks (MDB), including the Asian Development Bank, the World Bank, International Monetary Fund, European Infrastructure Bank and others, along with the Asian Infrastructure Investment Bank, for the first time. We have fought hard and negotiated hard for every dollar of this fiscal support, and we have succeeded because these vital institutions trust in Fiji. They believe that we are following the right course, pursuing the right policies, and making the right decisions.
Mr Speaker, these MDBs have good reason to place faith in Fiji’s financial management. From last year, Fiji set out on a path of fiscal consolidation –– no easy task in the face of continuous climate catastrophe. We laid out a detailed, policy-based pathway to a lower deficit which the MDBs resoundingly endorsed. in preparation for the USD 200 million bonds which will mature in October, Government has been parking money in a sinking fund, some are held domestically and some off-shore. In total, we’re talking about $450 million, which is sufficient to cover the principal and interest rate to pay that loan on 2 October 2020.
But reducing deficits in the face of COVID-19, isn’t only bad economics, it’s bad ethics.
That’s what so many of the, for example, self-appointed Facebook philosophers, don’t seem to get. Cutting government spending in line with a recession-driven drop in revenues, or worse, raising taxes in a depressed economy are both wrong at every level. Financially, it doesn’t work and it never has. During the global financial crisis, governments that mistook austerity as the answer lost ground in the global recovery. Nations took note, and total stimulus funding to combat the economic impacts of COVID-19 is already triple that for the entire Global Financial Crisis.
Cutting spending on critical projects during COVID-19 means cutting jobs and cutting salaries. It means cutting off Fijians from essential services. It means cutting education, healthcare, and welfare assistance. It means cutting off our fiscal response, but monetary fixes alone cannot maintain market stability, support household welfare, and help our businesses survive –– especially micro, small, and medium-sized enterprises, which are critical to many Fijians. In short, it means suffering the likes of which Fiji has never endured before.
The world economy is in the midst of a paradigm shift. Governments around the world are quickly recognising that only those nations that are willing to step up and finance a recovery will avert a catastrophe and emerge whole from this crisis.
‘The Fiji Roads Authority will receive a $348.9 million allocation in this year’s budget –– up from $276.5 million in our COVID-19 Response Budget, with $70 million allocated for road rehabilitation. To fast-track the progress of construction projects, we’ve allocated funding for what we call “shovel-ready” sites –– ones where much of, if not all of, the necessary planning and prep work has already been done. Those projects include the new maternity wing at CWM, the construction of the new Prime Minister’s Office complex, the completion of new and refurbished police stations, new sporting facilities, upgrade of hospitals, agroeconomy projects and other notable symbols of our national progress that cannot be lost to the pandemic.’