A Game Changer - Bold, Brave, Friendly - Targets Critical Areas
Despite a dramatic drop in revenue, the proposed National Budget is a gamechanger .
It’s bold, brave and friendly. It targets critical areas that need fixing to rebuild the economy and people’s livelihoods.
The fiscal and social policies ensure that no one is left behind and are set to restore confidence all around
The significant raft of incentives covers a wide cross section of our communities, from the lower rung of our socio-economic ladder to businesses
It is aimed at putting more money into our pockets to increase our spending power and stimulate economic activities. It is generous to the vulnerable and injects the right potion to help people recover and rebuild their lives.
On the social policy front the Government has not cut its welfare programme but has added on new initiatives to help alleviate the pain and suffering.
Free power, water subsidy
Perhaps, one of the highlights of incentives for the lower end of the economic scale, is the free electricity and water subsidy,
These are two big items in the budget of an average household. Families with incomes under $30,000 have been receiving a subsidy of 16.34 cents per unit for the first 100kwh of electricity.
That will jump to 34.01 cents per unit of electricity from August 1, 2021 to January 31, 2022.
50,000 households will be assisted with the allocation of $11 million to fund the free electricity and water initiative.
Social protection
Among the people friendly policies announced by Attorney General Aiyaz Sayed-Khaiyum included: Waiver of fees such as birth certificate registration and land survey
Reduction of traffic infringement fines
Extension of bill payment period
They provide relief for people as part of their social protection.
Financial pressures can cause mental health problems and lead to domestic violence and family turmoil and we are hearing reports of this happening.
Hardship that families go through drive some to the edge, worldwide trends show. It’s a phenomenon that we are not immune to.
Job creation incentive
Government has assured that the current scheme providing job opportunities for the unemployed including those laid off because of COVID-19 in the informal sectors will continue.
Under the scheme, employers are granted a wage subsidy equivalent to the minimum wage rate of $2.68 per hour for a three-month period when they employ eligible Fijians, in particular, people from the informal sector.
So far 48 employers are part of the scheme creating 831 new jobs. $5 million has been allocated for this scheme on top of the $3 million already spent.
$4 million has also been set aside to employ the jobless to work in nature programmes like reforestation work such as planting of mangroves and supergrass.
Keeping businesses alive
$200 million has been set aside to help businesses stay afloat during this crisis - businesses that are severely hit because of the adverse economic impact of the border closure, restrictions and lockdowns.
It will provide businesses a lifeline to survive. This helps them in their operational needs, including payment of wages and salaries, rental cost, utility bills, purchase of stocks and other working capital requirements
Here are the details:
Existing micro businesses with turnover less than $50,000 will be eligible for a maximum funding of
$10,000.
Small businesses with annual turnover of $50,000 to $300,000 will be eligible for a maximum funding of $20,000 while medium sized businesses with annual turnover of $300,000 to $1.25 million are eligible for a maximum financing of $50,000.
Large sized businesses with a turnover of more than $1.25 million can access up to $100,000 under this new COVID-19 Recovery Credit Guarantee Facility.
The Reserve Bank of Fiji will provide a special funding of $200 million that can be accessed by commercial banks, Fiji Development Bank (FDB) and other licensed credit institutions at a very low rate of 0.25 per cent.
These financial institutions will on-lend these funding at a maximum lending rate of 3.99 per cent.
The Fijian Government will fully subsidise the 3.99 per cent interest cost for the first two years with a total funding allocation of $8 million in the FY2021-2022 Budget and an additional funding of $8 million that will be provided in the following budget.
This means that for the first two years, none of these qualifying businesses under this Facility will be required to make any repayments as the Fijian Government will pick up the interest cost and ensure that the loans are fully serviced.
The banks have agreed that these will be interest only loans for the first two years and the default rate will be zero in the next two years.
This gives businesses two years to stabilise and recover before they start the loan repayments from Year 3.
However, if there will be some loans that may go bad from Year 3, the Government through the RBF is providing a guarantee of 90 per cent of the loan for micro businesses, 85 per cent for the small businesses, 80 per cent for medium sized businesses and 75 per cent for large businesses.
A sum of $5 million is appropri- ated in the
FY2021-2022 Budget that will be paid to the RBF to manage the guarantee.
Further allocations will be made over the years to en- sure that sufficient funding is held at the RBF to cater for any future defaults.
Boost for ICT industry
In another major move the Government is offering incentives for investment in Infrastructure for Information Communications Technology (ICT) purposes.
It will boost the morale in the industry. The provision is Government’s recognition that ICT is the way to go for the future.
Any new investment in the infrastructure for businesses engaged in the ICT Sector
will be granted a tax holiday and a duty concession package, provided that 90 per cent of the income for the investor shall be derived from the ICT business.
The Tax Exemption Structure to boost the industry:
$2,000,000 to $5,000,000 – 10 years tax holiday $5,000,001 to $10,000,000 – 15 years tax holiday
In excess of $10,000,000 – 20 years tax holiday
If the investor is also involved in developing strata titles and selling it to ICT/Business Process Outsourcing (BPO) companies, the sale proceeds will also be exempt from income tax.
Customs import duty exemption for the establishment of the business will be available on the importation of raw materials, machinery and equipment including spare parts. The same tax holiday period will also be extended to existing ICT/BPO companies.
Tax holiday for agriculture
In addition to the new initiatives to boost investment in agriculture a tax holiday is also offered.
This would apply to the following capital investments:
$100,000 - $250,000 — five years
$250,001 - $1,000,000 — 10 years
$1,000,001 - $2,000,000 — 15 years
More than $2,000,000 — 20 years
Duty free importation of all machinery, plants, equipment and tools will continue for the agriculture sector.
Hotel investment incentive
Government is extending the Short Life Investment Package (SLIP) to renovations and refurbishments of existing hotels or resorts. It is giving the following:
5 year tax holiday for investments more than $2,000,000. The incentive will be available effective from 1 August 2021 until 31 December 2022. This incentive can be claimed only once.
SLIP for new hotels
For new hotels, increased income tax exemption is available for substantial investments of more than $40,000,000. The revised tier will be as follows:
Capital Investment ($)
Tax Holiday
$250,000 - $1,000,000 — five years
$1,000,001 - $2,000,000 — seven years $2,000,001 - $40,000,000 — 13 years
In excess of $40,000,000 — 25
Standard Allowance will be increased to 50% from 25%.
Duty free importation for all hotels and resorts will be available from 1 August 2021 until 31 December 2022. 5 per cent ECAL will also be waived on all import.
The list of incentives goes on. They are necessary to stimulate growth and put us on firmer footing to absorb the current negative impact of the pandemic and prepare us for future opportunities.
Government has assured that the current scheme providing job opportunities for the unemployed including those laid off because of COVID-19 in the informal sectors will continue. Under the scheme, employers are granted a wage subsidy equivalent to the minimum wage rate of $2.68 per hour for a three-month period when they employ eligible Fijians, in particular, people from the informal sector.