High tax rates hamper tourism business
HIGH tax rates have reportedly constrained the profitability of tourism businesses in Fiji.
This was one of the conclusions made following a baseline assessment done by Fiji’s tourism industry stakeholders for the Ministry of Tourism & Civil Aviation’s 10-year National Sustainable Tourism Framework (NSTF).
“Prior to the COVID-19 pandemic, tourism-oriented businesses were required to pay an Environment and Climate Adaptation Levy (ECAL) of 10 per cent on prescribed services if their annual turnover exceeded $1.25 million.
“ECAL was additional to a nine per cent VAT (value-added tax) and a six per cent service turnover tax,” the assessment report stated. “The resultant combined tax rate reduced industry profit margins and constrained both investment and reinvestment in the sector.
“This led to some resorts becoming run down, and operators competing on price for package tourists.
“In July 2020, as part of the Government of Fiji’s pandemic-related economic and fiscal stimulus, the combined tax rate was reduced to 14 per cent and later consolidated to a single VAT rate of 15 per cent in 2022.”
It was also concluded that starting a business in Fiji could be challenging and that securing approvals for new projects was a bureaucratic and burdensome process.
“New hotel operations, for example, require multiple licences from different regulatory bodies, which can take up to several years to be approved.
“This is a deterrent for local and foreign investors and constrains new developments and entrepreneurship.
“Recent reforms, including an online portal (bizFiji) with information on starting a business and obtaining a construction permit, online company and/or business name registration, online tax number registration and the removal of business licences aim to ease the regulatory burden on new businesses.
“Various stakeholders have highlighted the delays in the completion and approval of environmental impact assessments as a significant constraint to realising investments.”
An investment facilitation committee, an inter-ministerial body under the ministry, has been established to support the streamlining of investment-related processes.