New Tax Policy: Official Press Release
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Effective January 1, 2012, the Bainimarama Government will reduce or eliminate taxes for 99.4 percent of taxpayers.
· The top income tax marginal rate will be cut from 31 percent to an absolute ceiling of 20 percent.
· RESULT: The Bainimarama Government will put $53.1 million back in the pockets of Fijians.
· Anyone earning zero to $15,600 will pay nothing in taxes.
· Income between $15,601 and $22,000 will have a tax rate of 7 percent. It was 25 percent. The fixed component is eliminated.
· RESULT: Those earning $20,000 a year now are paying about $1500 in taxes. In the new system, they will pay about $300.
· In the next bracket, between $22,001 and $50,000, the rate will be 18 percent, down from 31 percent. The fixed component has also decreased.
· RESULT: Fijians who earn between $50,001 and $100,000 will have their tax rate reduced 20 percent. Previously it was 31 percent. The fixed component will also decrease.
· Beginning January 1, the corporate tax rate will drop from 28 percent to 20 percent.
· Companies will pay almost all of their advance payment within the fiscal year, but not at once. This reform means 30 percent of taxes will be paid in June, 30 percent in September, and 30 percent in December. The remaining 10 percent will be paid in the following February.
· To curb the problem of tax evasion, penalties will increase and their scope will be extended. There will be a “Garnishee” system on joint bank accounts, whether with spouse or children, for both customs and tax.
· As of January 1, 2012, the government is instituting the “Social Responsibility Levy.” This will be applied to anyone earning over $270,000 a year. This will fund food voucher and family assistance programs. In this way the top 1 percent of taxpayers will now be contributing more fully to the social good.
· RESULT: $9.8 million from this levy will go towards social welfare programs.
· The Hotel Turnover Tax, commonly known as HTT, will be renamed the Service Turnover Tax, or STT. The tax rate will remain the same, but will now be extended to:
o Rental car operators
o In-bound tour operators
o Events management operators
o Recreation, entertainment and cinema operators
o Bars and night clubs
o Bistros or coffee shops with an annual gross turnover of $1.5 million and above
o Restaurants with annual gross turnover of $1.5 million and above
o All water sports, underwater activities, skydiving, hot-air balloon rides, river safaris, aircraft charter or hire including helicopters, with an annual gross turnover in excess of $300,000
o And home stay operators
· The Government will also increase the Departure Tax from $100 to $150.
· Government will introduce a 2 percent levy on outstanding balances on credit cards on a monthly basis. Similar to the voice call tax, this will be collected by financial institutions and remitted to FRCA on a monthly basis.
· Government will introduce a new fringe benefit tax regime from 2012. Employers will be responsible for paying and remitting to FRCA the relevant amount at a rate of 20 percent.
· The current employer contribution to FNPF, which is allowed as a deductible expenditure, will continue but at 50 percent.
· Government will impose a levy of $7,500 upon point of sale on luxury cars of a cylinder capacity exceeding 2500cc, but not exceeding 3000cc. This levy will not be imposed on single and twin cabs utility vehicles. For luxury cars of a cylinder capacity exceeding 3000cc, upon point of sale we will impose a levy of $20,000.
· Given the low claim payout, all insurance companies that charge premiums for the Government-mandated, third-party insurance will contribute 20 percent of all the premiums collected. The new levy must not result in increased premium payments for the insured. This levy is to be remitted to FRCA on a monthly basis.
(Friday 25thth November 2011, No:2131/MOI) The New Bainimarama Tax Policy