June 15 2019 INL_Digital_Edition

08
JUNE 15, 2019
Fijilink
Tax-free, incentive-galore Budget promises robust growth
Venkat Raman
Finance Minister Ayaz Sayed-Khaiyum
has taken some bold initiatives in delivering
his Annual Budget to Parliament in
Suva on June 7, 2019, the most of which
were in tax incentives to stimulate the economy
and attract local and foreign investment.
Fiji’s Budget for the fiscal year 2019-2020
showed a reduction of F$ 1.8 billion to F$ 3.8
billion, down from F$ 4.6 billion in last year’s
projections.
Five Factors
Mr Sayed-Khaiyum told Parliament that
he was driven by five factors in preparing
this year’s Budget, including implications of
an uncertain global economy, employment
and entrepreneurial opportunities to young
Fijians, encouraging innovation and improving
technology; environmental protection and
strengthening law and order.
“We expect the Gross Domestic Product
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(GDP) to grow to F$ 12.7 billion this year, making
for ten straight years of growth,” he said.
In Fijian terms, foreign reserves,
standing at $ 1.92 billion resonates a sound
economy, equating to more than four months
coverage of retained imports of goods and
non-factor services. With inflation at 2.1%, Mr
Sayed-Khaiyum claimed responsible financial
management.
Encouraging investments
Without giving details, he said that his
government was reviewing the Foreign Direct
Investment Act to encourage greater foreign
investment and reforming State-Owned and
Public Enterprises to become more profitable,
efficient and customer-oriented.
A week before presenting Budget 2019, Mr
Sayed Khaiyum launched the ‘Personal property
Securities Registry,’ to enable Fijians to use their
assets as collateral to secure loans.
In actual terms, access to finance has become
easier, with cost of borrowing lower than before.
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Prime Minister Josaia Voreqe Bainimarama with National Economy Minister
Aiyaz Sayed-Khaiyum in Fijian Parliament after Budget on June 7, 2019
(Picture by Ronald Kumar for Fiji Sun)
No new taxes or tax increases
have been announced.
“We are also conducting
a review of the Financial
Management Act (FMA) 2004
to make some key changes
that meet the high expectations
of transparency and
accountability in the modern
economy. Every year, before
the Budget announcement,
the government must table a
broad fiscal framework that
sets the stage for budgetary
preparations, thereby building
accountability and adherence
to fiscal projections,” he said.
Budget Highlights
Reintroduction of Export
Income Deduction with retrospective
application from 2018
and maintained for three years
at the rate of 50%. The Scheme
will expire next year.
The threshold to qualify for
25% investment allowance under
the Income Tax (Renovation
of Building Incentive) Regulation
reduced from F$ 1 million
to F$ 250,000. The incentive will
be extended to other buildings
apart from those in towns and
cities but will only be available
to commercial buildings.
Audio Visual Incentives
The Income Tax (Audio
Visual Incentives) Regulation
2016 will be amended with the
following changes: The film
tax rebate will be increased
from 47% to 75% and will
be based on the expenditure
incurred in Fiji and paid
to Fiji Resident companies
for goods and services; The
maximum rebate payable
per approved final certificate
will not be more than F$ 15
million; A200% tax deduction
will be available to companies
investing in camera and other
filming equipment for audio
visual productions. Income tax
holiday to companies setting up
production facilities including
equipment, cameras, editing
and postproduction studios.
Tax Reliefs
Income tax exemption for
seven years if capital investments
is more than $2 million.
Import duty exemption on
raw materials, plant, machinery
and equipment (including
spare parts) required for the
establishment of the business.
Tax exemption on interest
earned from Government,
State-Owned Entities and
Statutory Authorities financial
instruments (bonds, treasury
bills and promissory notes) by
individuals and private entities
excluding financial institutions.
Income Tax (Residential
Housing Development
Package) Regulations 2016 will
be amended to provide clarification
on a ceiling on the sale
price of residential housing so
that it is affordable to potential
average Fijian home buyers.
The incentive will only be
available with the following
condition to a multi-storey development:
Each storey to have
at least 15% of the units below
the price ceiling of $300,000.
This requirement only applies
to the first five storeys of the
development.
The incentive will also be
available for a ground level
multi-unit housing developments.
The following incentives
will also be available (a)
Income tax exemption on
developer profits for the
entire project (b) Import duty
exemption on the importation
of capital equipment, plant and
machinery.
Climate Change Challenges
Fiji has been a strong
advocate of environmental
protection and Prime Minister
Josaia Voreqe Bainimarama
has championed the world on
Climate Change.
The seriousness with which
Fiji has addressed this issue
was indicated in Budget 2019.
“Fiji has led a concerted
global campaign to make
international climate finance
accessible, not on the basis of
the size of anation’s economy,
but on the basis of vulnerability
to climate impacts. Essentially,
this means, Fiji can now
access over F$ 55 million a year
annually at zero interest rate,
with an extended repayment
term of 40 years,” he said.
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