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FICs consider options for improving revenue collection

FICs consider options for improving revenue collection

10th December 2010

As Forum island countries continue to face the effects of the global economic crisis, a study on improving revenue collection and capacity in the region has recommended revenue reforms to ease the pressure on government budgets in the FICs.

The study, commissioned by the Pacific Islands Forum Secretariat at the request of the Forum Economic Ministers’ Meeting in 2009, was done by the Pacific Financial Technical Assistance Centre (PFTAC). The study was presented to FEMM in Niue in October.

“The global economic crisis highlighted the significant fiscal challenges that face FICs in the coming years. The crisis placed pressure on government budgets in most FICs. With fiscal deficits rising, effective revenue collection became increasingly important,” says Tuiloma Neroni Slade, Secretary General of the Pacific Islands Forum Secretariat.

Mr Slade added: “Even with a global economic recovery, fiscal challenges are likely to intensify in FICs, particularly as they look to increase expenditure levels in areas key to growth and poverty reduction.”

“The onus is now on individual FIC governments to consider the implementation of whichever measures that is appropriate to their varying capacities.”

The study states that revenue reforms should create a system that is fair, transparent and easy to administer and consistent with the resource needs of the government.

The Forum Economic Ministers who attended the Niue FEMM noted that improving revenue performance through broadening the tax base and improving the effectiveness of collections is crucial for sustainable long term fiscal strategies in FICs. They said that this should take place in coordination with continued attention to improving the quality and focus of public expenditure, and making effective use of development partner financial support.

The Ministers noted the success of many FICs in adopting a modern tax regime centred on broad-basedconsumption and income taxes with minimal exemptions. These combined with collection systems based on risk management and voluntary compliance, provide a stable tax base consistent with the limited capacity in FIC revenue administrations.

Appropriate taxation of natural resources, including fisheries, minerals and forestry is also important for the development strategies of a number of FICs.

The Forum Economic Ministers said that tax reform is a difficult political and technical process that requires time, broad based consultation and sustained technical support for successful implementation. They agreed to continue to coordinate tax administration activities, including through the Pacific Islands Tax Administrators Association.

The Forum Economic Ministers who met in Niue in October agreed that individual countries adopt the best reform agenda suitable to its own context.


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