VCCI wishes to advise local businesses that the Meeting on PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement, is postponed to Tuesday 9 May 2017. Any manufacturers, exporters, any businesses of any economic industry sectors including services, and all businesses interested to hear more about these trade agreements PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement and ask their questions, are welcome to come to VCCI to attend this meeting on Tuesday 9 May 2017 at 3pm. You can confirm your attendance and get more information on PACER-Plus Trade Agreement by contacting VCCI at 27543 or by email email@example.com
VIPA CONSULTATION 28 APRIL 2017
Vanuatu Chamber of Commerce and Industry wishes to advise all businesses that the Vanuatu Investment Promotion Authority (VIPA) will conduct a consultation meeting on the review of both the VIPA Act [CAP 248] and the National Investment Bill done by the International Finance Corporation (IFC), World Bank Group. As you are fully aware, both legislations have been having issues, therefore the Investment Bill did not make it to parliament. The VIPA management would like to undertake further reviews on both legislations in response to some demands and therefore request your assistance in this first consultation process. Attached are copies of both documents. The meeting will be held on Friday 28 April 2017 at 9am at the VNPF Conference Room (venue to be confirmed) to get your views on the documents. As background information, the main reason is the National Investment Bill did not reach Parliament – there was not enough consultation undertaken by IFC, the Bill content is not reflecting what VIPA is supposed to be doing. On this reason, past Minister(s) have rejected the Bill. Recent calls from the VIPA Board was to do a review of the VIPA Act [CAP 248] and leaving the Investment Bill aside. In the discussion, we will have a look at both documents, then decide what to do in terms of making amendments to CAP 248.
VCCI ANNUAL GENERAL MEETING ON 4 MAY 2017
VCCI wishes to inform local businesses that the Annual General Meeting of the Port Vila Chamber of Commerce and Industry will be held on Thursday 4 May 2017 at 5pm in the Conference Room of the Chamber of Commerce. The Agenda will include a welcome by President, approval of Minutes of AGM held on 26 May 2016, matters arising from the Minutes, Annual Report Year 2016, Financial Statements for the Year Ended 31/12/2016, Auditors Report, election of Council Members, and major issues affecting Businesses: update on Income Tax. Light refreshments will be served after the meeting. All Business Licence Holders are invited to attend.
The Councillor positions for the sectors of Tourism, Finance, Small Commerce, Shipping and Public Utilities are vacant. If your business operates in one of these economic sectors and you are interested in becoming a VCCI Councillor, please contact now the VCCI Reception for more information by phone on 27543 or by email at firstname.lastname@example.org
Vanuatu is an Island State and has similar problems as a land locked state but more-so it has to be understood that this geographic fact cannot be changed and therefore special consideration should be given to the ways that the country can survive and nourish under a tax regime and also be protected by selective tariffs to develop it Financial independence taking into account the difficulties of what being an Island state entails.
Recent world events have occurred with major first world economics reversing their income tax regimes this includes among other things, the exit of the U.K. from the EU and reduction of taxes eventually considering a similar tax haven approach, the Trump win in the USA where he has promised tax cuts by 50% with a corporate rate at 15%. He plans to stimulate the economy and to impose duty tariffs to bring jobs back to America and to get out of free trade agreements.
This has not just occurred in the U.S.A. but also since then, Australia and New Zealand have announced plans for large tax cuts as well. These actions have been made with two aims, one to stimulate development and the other to remain competitive in attracting investment.
This recent change in events has turned the financial policies of many western countries upside-down compared to their long pushed doctrine of imposing taxes on incomes and profits and places more emphasis on taxes like Vanuatu’s VAT. This change in policy contradicts the recent proposal for Vanuatu to introduce Income tax, rendering the arguments presented to impose tax empty, as the consultants themselves will now be faced with this in their own countries to adapt to a degree where Vanuatu is at the moment. Also, in the case of multilateral institutions, they will need to rewrite the International monetary philosophy.
The most effective way to increase government revenue and to maintain growth is to:
- Ensure all contribute to the VAT procedure which allows tax to flows on to all through the Reverse Multiplier System throughout the country. Many honest businesses comply with the VAT system but :
- Attention should be paid to those who blatantly avoid proper adherence through non-disclosure of sales avoiding VAT particularly for those businesses working on a cash basis.
- Better compliance and a modest increase in the VAT rate would give the government the additional revenue it needs while maintaining growth and investment.
The introduction of an income tax system to Vanuatu will lead to disinvestment.
VAT does not require massive numbers of staff or does it require professional help (to a degree) to do returns. A vital need though is for the Revenue Department to recruit compliance Officers who can read and write foreign languages other than Bislama, French and English.
The flow-on effect of the VAT system and the Development Incentives in Rural Areas
The cash economy and contribution to GDP in rural areas is vital to the country’s growth and is only stimulated by the wants of rural people. This means the incentive to produce comes from the desire to obtain something of need or luxury.
Such income comes from Copra, Cocoa, Kava, Coffee, Marine products, Agriculture and Services.
Rural people who have the means to do so, generally will produce enough cash flow to service their economic needs. If the cost of obtaining this includes VAT, then they contribute to Government revenue but also contribute to the country’s GDP through rural development and support the national economy.
Development of the rural economy and its contribution to the county’s GDP is a must for economic Independence. It is an essential element of developing the rural economy beyond subsistence living but at the same time not underestimating the need to be in partnership with the informal economy.
Therefore it is incorrect to say that the rural populace should not have VAT but instead pay Income Tax as that will not happen and that will further narrow the tax base and government revenues and push the tax burden back to urban societies only.
As a check on this, if the cost of imported goods such as rice as an example etc., becomes too expensive for a rural consumer, then they will then revert back to consuming local product such as kumala and other traditional root crops instead of rice. This can be the same case across the board such as fishing, local housing, and other activity in the informal non cash economy so the rural population will be no worse off relatively. The informal economy in itself is a vital part of, but an unmeasured contributor to the GDP.
Most businesses in Vanuatu are small and mainly are run by a one key investor and family members.
The compliance with all rules regulations including VAT and other licenses usually comes back to that one key person and the burden of administrative tasks that he or she has to do, in many cases outweigh the time spent on actually running the business.
In many cases, these jobs have been delegated to staff but not the responsibilities and considerable time has to still be spent ensuring all is correct. If income tax is introduced, this will again place a bigger burden on Management to the detriment of their business management.
Another important point is that for income tax for businesses, it is expected that most companies in Vanuatu make large profits. That is definitely not the case for most small to medium businesses run only on break- even levels and even at losses where they only survive with the owners borrowing money to keep them afloat. This means that there would be zero income for the government with corporate tax in these cases which is the majority with a few exceptions for those with monopolies and well- founded control over brands.
It must be recognized and realized that Vanuatu is a small developing country and cannot be expected to take on first world larger economy systems which require a lot of man power and support costs to service them.
Also their economies and tax systems are based on paid employment of most of their population with the aim of having less than 10% only out of work. Whereas Vanuatu only has a small percentage of the population in paid employment with around 80% of the population in rural areas with little or no paid employment.
As mentioned beforehand, these first world countries are now cutting back on their tax regimes and Vanuatu should question why in relation to the push to introduce Income Tax and Profits Tax here.
Another factor restricting growth in some countries is the effect of Free Trade Agreements like the MSG and Pacer Plus trade agreements. The only real benefits which flow from this are to the larger countries in the group i.e. with the former Fiji and Papua New Guinea and with the latter Australia and others in that proposed loop.
The situation is like this; in the case of MSG trade agreement, those countries have larger populations compared to the other smaller members. Also they have had the advantage of being able to develop businesses which have passed the critical level of production to be sustainable, have satisfied their domestic markets, and are in a position to sell (or dump) excess capacity to other member countries taking advantage of duty free import status.
This may look good at first sight but in affect precludes smaller states being able to reach the stage of developing their own industries and surviving to grow within, if local production efforts are faced with cheaper imports from the larger members.
This example can be extended to the effect of larger agreements with metropolitan Powers or subscription to International Trade Agreements but Vanuatu must look at its current level of development where it needs to have some tariff protection for both to raise revenue and on the other hand assist in growing locally based businesses within the country.
Whilst cheaper imports in the short term may look good, it can delay domestic production of certain items and shackle small countries forever to be just consumers without entrepreneurs being able to develop under the umbrella of a selective tariff regime that will keep them in business until the domestic market volume gets to the stage where it can invest and stand on its own feet and compete with imports.
These arguments support the maintenance of selective import duties to encourage infant industries which can be developed over time and also gives the government revenue as well.
So in conclusion, thoughts are, forget about income tax, sharpen up and broaden compliance with VAT and be very cautious with trade agreements.
VCCI wishes to remind local businesses that there will be a Meeting on PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement, at VCCI in April 2017. Any manufacturers, exporters, any businesses of any economic industry sectors including services, and all businesses interested to hear more about these trade agreements PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement and ask their questions, are welcome to come to VCCI to attend this meeting on Thursday 20 April 2017 at 3pm. You can confirm your attendance and get more information on PACER-Plus Trade Agreement by contacting VCCI at 27543 or by email email@example.com
The recently released ‘Vanuatu 2030 The People’s Plan: National Sustainable Development Plan 2016-2030‘ is the perfect lens with which to evaluate PACER-Plus and what it means for Vanuatu’s development aspirations to determine whether PACER-Plus should be signed or not signed.
The People’s Plan very clearly states that for Vanuatu, development is defined as being “more than just acquiring material wealth”. It goes on to state that “The country was founded on Melanesian values of respect, harmony, unity and forgiveness. These values shape our cultural heritage, which is the country’s strength…. Our development must be firmly anchored to these values that holds our society together.”
Further, “Ni-Vanuatu resoundingly called for a balance between the social, environmental and economic pillars of sustainable development, with our cultural heritage as the foundation of an inclusive society.”
Free Trade doesn’t match the Vanuatu Reality
Free trade however pushes a view of the world that prioritises economic outcomes which is the antithesis to Melanesian indigenous values as outlined in the Peoples Plans. Traditionally ‘free trade’ is applied to food and goods but it also includes many other aspects like services and investment. It requires all countries (including Vanuatu) to open their doors to every other country’s products and remove any protections for their own. Free trade theory argues that government support for industries or taxes on imports artificially changes the price of goods or services and ultimately make everyone worse off by protecting inefficient industries.
Loss of Government Revenue will Undermine many Development Goals
Under PACER-Plus Vanuatu is scheduled to make cuts to its import taxes. These cuts will kick in when Vanuatu graduates from being a Least Developed Country, currently scheduled for 2020. Current estimates have these cuts wiping out USD$6million to USD$8million per year of government revenue when they come into effect, the equivalent of the 2014 budgets for the Ministries of Land and Natural Resources and Tourism, Trade, Commerce and Ni-Vanuatu Business.
The People’s Plan makes many references to ensuring that limited resources are used most effectively, ensuring that essential services like health, education, and infrastructure are provided to all. Yet, but agreeing to PACER-Plus and the cuts that Vanuatu will be forced to make to border taxes will make those laudable goals even harder to achieve.
Already there are ongoing discussions about raising government revenue in Vanuatu, PACER-Plus will make those discussions even harder by cutting tariff revenue and putting more pressure on already resource strapped government departments.
Make it Harder to Grow and Support Ni-Vanuatu Businesses
Policy Objective ECO 1.7 aims to “Stimulate economic diversification to spread the benefits of growth and increase economic stability”. Government intervention in the economy can help diversify the economy and allow infant industries to grow and mature until they are ready to stand on their own.
The ability of governments to support and nurture local industries has been a key development right for all industrialised countries. As the former Head of the Macroeconomics and Development Policies Branch, United Nations Conference on Trade and Development (UNCTAD) notes, no country (except Hong Kong, China) has managed to industrialise without going through the infant-industry-protection phase.
Tariff policy is part of a dynamic industrial policy, and tariffs vary depending on the level of development of a country and the needs of various domestic industries. For instance, at an early stage of development, tariffs on labour intensive and resource intensive products are generally raised selectively, after which tariffs move down but tariffs increase on low-technology intensive products.
However, PACER-Plus is fixing a maximum applied level of ALL tariffs, even those that are not being liberalised. This will severely hamper any attempt for a tariff policy supportive of industrialisation and building domestic value chains. This is unacceptable for a ‘development agreement’ and challenges government’s right to develop.
Furthermore there are still ongoing discussions around the proposed Infant Industry Protections in PACER-Plus with Fiji unhappy with the level of protections on offer. Fiji is expected to not sign PACER-Plus because their demands have not been met, a position that Vanuatu should consider in the interest of building a dynamic and vibrate economy.
Policy Objective ECO 4.4 in the People’s Plan aims to “Improve and expand the range of sustainable tourism products and services throughout Vanuatu and strengthen links to local production”. There are many ways to do this but under PACER-Plus Vanuatu will be restricted in its ability to ensure that benefits from investment (like in tourism) are maximised by mandating the use of local inputs. Many developed countries have made investors use local resources (both people and materials) as a way to ensure that the gains and the development of skills and industries are widespread. This means that local content policies that directly or indirectly favour domestic products will be outlawed under PACER-Plus.
PACER-Plus will restrict the use of such policies for investments in both goods and services, removing a pro-development policy for Vanuatu to use.
PACER-Plus ‘benefits’ aren’t enough
Policy Objective ECO1.6 aims to “Require all new trade agreements to demonstrate tangible benefits in the national interest” and this should be applied stringently to PACER-Plus.
Proponents like the Office of the Chief Trade Advisor say it will “inject dynamism into the economies of the PICs” and give them the “significant benefits from international trade”. It is argued that PACER-Plus will lower costs of business through lower tariffs and thus make Ni-Vanuatu companies more competitive allowing them to take advantage of the changes to ‘Rules-of-Origin’ and export more. Even if there are generous changes to the Rules-of-Origin rules goods from ASEAN countries will most likely out compete goods from Vanuatu. Further the quarantine restrictions still place the burden on Vanuatu to prove that they meet Australian and New Zealand standards, something Vanuatu may struggle to do.
As mentioned above, there are many threats that PACER-Plus poses to Vanuatu’s ability to implement the People’s Plan. Even if you take at face value the promises of increased exports and investment (the latter being shown to have little links to signing trade deals) it would signal a prioritisation of the economic pillar over all others.
Creating a stable business environment and regulatory framework (Policy Objective ECO 4.1) is possible without PACER-Plus. Increasing labour mobility (Policy Objective ECO 4.7) to Australia and New Zealand is already happening and currently sits outside of PACER-Plus, and holds no guarantees with the schemes being employer driven.
Any tangible ‘benefits’ that PACER-Plus may appear to provide are greatly outweighed by the costs that will be borne by Vanuatu as it deals with loss of government revenue, loss of policy space to support Ni-Vanuatu industries, and the loss of the right to protect its people and natural resources.
Vanuatu needs to make a decision on PACER-Plus that supports its plan for development. Australia and New Zealand, our neighbours who are key sources for tourism and investment and donor countries, must respect our ability to make these decisions for ourselves.
There will be a Meeting on PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement, at VCCI in April 2017. Any manufacturers, exporters, any businesses of any economic industry sectors, and all businesses interested to hear more about these trade agreements PACER-Plus Trade Agreement, MSG TA3, China Trade Agreement with Pacific Island countries including Vanuatu, and Vanuatu New Caledonia Trade Agreement and ask their questions, are welcome to come to VCCI to attend this meeting on Thursday 20 April 2017 at 3pm. For more information, you can contact VCCI at 27543 or by email firstname.lastname@example.org
The Vanuatu Chamber of Commerce and Industry (VCCI) position on Personal Income Tax (PIT) and Corporate Income Tax (CIT) is outlined in the report Vanuatu Revenue Review, Consultation Feedback of Vanuatu Chamber of Commerce and Industry of November 2016. This analytical study report was submitted formally to the National Revenue Review Committee in a letter dated 25 November 2016 addressed to the Chairman of National Revenue Review Committee, Ministry of Finance and Economic Management. A letter of reminder on this matter was forwarded to the Chairman of National Revenue Review Committee on 1 March 2017. So far, VCCI has not yet received any reply in an official printed written format to its submission. The content of VCCI letter of 25 November 2016 is as follows.
“On behalf of the Vanuatu Chamber of Commerce members and particularly those who work in the International Financial Centre industry, we urge you to re-evaluate the proposed introduction of Personal and Corporate income Tax in Vanuatu. Proposed tax reforms would be absolutely detrimental to the Offshore Financial Centre (OFC) which plays a key role in attracting international businesses and foreign funds to Vanuatu. The financial sector is an essential part of our economy and contributes between two and three percentage points to GDP, providing stable income for a small with limited opportunities. With an active and competitive policy towards international business, tourism, real estate and several other field of investments, it nicely benefits GDP growth. There has been substantial benefits to the nations who have understood and supported the growth of their nation’s Financial Centre, their populations benefiting in a number of ways. We would therefore like to suggest alternative options for the tax reform which are better suited for Vanuatu.
Starting from 2018, Vanuatu will have to exchange information following the CRS (Common Reporting Standard). Each country will annually automatically exchange with the other country the below information:
- the name, address, Taxpayer Identification Number (TIN) and date and place of birth of each Reportable Person:
- the account number;
- the name and identifying number of the Reporting Financial Institution;
- the account balance or value as of the end of the relevant calendar or, if the account was closed during such year or period, the closure of the account.
Currently, Vanuatu is note able to share these details with OECD countries as such information is not being collected. While Vanuatu, like all other nations, has committed to participate, it does not have an income Tax Office and therefore does not have the means to collect such information from its own and foreign citizens residing in the country.
The OECD countries are well-aware of the current financial situation in Vanuatu, including the Volumes of Swift Transfers, currency movements, and inflows and outflows, as all of this is closely monitored by First World Countries. The volumes are relatively low and well within the expected range given the size of Vanuatu economy.
Global agenda of OECD countries
By implementing CRS globally, First World Countries aim to avoid a potential future situation where someone could use Vanuatu to transfer or hold funds. It has become the mission of OECD countries to convince Vanuatu Government that it must set up an Income Tax Office and start collecting and sharing the information with other nations, as intended by the CRS.
The decision to implement Income Taxation in Vanuatu is therefore not made independently, but is primarily guided by First World Countries. For instance, the goal of Australia is to implement Taxpayer identification Number system in Vanuatu and start collecting the data in order to share it annually to avoid any potential asset and wealth transfer from Australia (or any other OECD nation) to Vanuatu after 2018.
First World Countries do not want Vanuatu to benefit and are not concerned about Vanuatu wealth, our nation’s future and the interests of our people. The entire Vanuatu tax reform is based on making CRS system work globally at the expense of our citizens. TINs would have to be issued to all Ni Vanuatu residents aged 18 or older (it will effectively be a Social Security Number). This means that Vanuatu will have to bear the massive costs of issuing around 200 thousand of these numbers, just so that – 10 thousand of them could be monitored by OECD countries.
Tax reform decisions should be made independently
Vanuatu Government should primarily take into account the interests of Vanuatu, just like the US Government is looking at US citizens’ interests first. Vanuatu is ready to cooperate and to work with other nations to be a good planet citizen and participate openly to fight corruption, money laundering, crime, terrorism – as long as this is not affecting negatively the people of Vanuatu.
Vanuatu must decide independently, for its own national interest if Corporate Income Tax (CIT) and Personal Income Tax (PIT) is a positive policy and the best way to raise money for public expenditure. This decision should note be dictated behind closed doors by our neighbours and by First World Countries which have their own agenda instead of Vanuatu interests at heart.
Vanuatu does not need CIT and PIT system to achieve compliance and transparency
We agree that Vanuatu and all its financial institutions must be FATCA compliant, in line with CRS-2018. We also agree that we should have measures in place to show that we are monitoring our economy and cash flows within the country. However, introduction of CIT and PIT is not necessary to achieve these goals. The two subjects are often wrongly mixed up, and this can be demonstrated by the fact that none of the 18 countries with no PIT are on the FATF list of high-risk and non-cooperative jurisdictions except Vanuatu:
|High-risk and non-cooperative jurisdictions:||Countries with no PIT:|
|AfghanistanBosnia and HerzegovinaDemocratic People’s Republic of Korea
Lao People’s Democratic Republic
British Virgin Islands
St. Kitts & Nevis
Turks and Caicos
United Arab Emirates
As shown in the table above, Vanuatu is not on FATF list based on its CIT or PIT legislation as it has nothing to do with it. Vanuatu will still be on the ‘grey list’ even after implementation of CIT and PIT as these subjects are not related.
Vanuatu has everything to lose and nothing to gain from introducing income taxes
The future of the Vanuatu Offshore Financial Centre is not clear. The offshore sector, directly and indirectly, represents a large share of economy, with around 5,000 registered institutions offering a wide range of offshore banking, investment, legal, accounting, insurance and trust company services. However, with the introduction of PIT and CIT, Vanuatu would lose its competitive position as a tax jurisdiction and the OFC could completely disappear. The OFC seems to be already written off by the Revenue Review committee without saying it out loud.
Bringing money from Offshore Financial Centre businesses positively contributes to our nation’s development as is not affecting the local economy while at the same time helps raise public revenues. While the taxes collected from the Offshore Financial Centre (OFC) businesses are relatively small and cannot be the main source of funding for our government, it would be irrational to completely dismiss them. In fact, modernizing the Offshore Financial Centre by following successful countries such as Cayman, Singapore, Hong Kong, BVI, Luxemburg, Belize, Jersey, Mauritius, Bermuda, etc. could bring a lot of additional revenues to the government from International Corporations, forex dealers, residency, and other sources.
There are a number of countries that are offering similar tax jurisdiction benefits to international businesses as it is wise to do so. It is a way to demonstrate a small nation’s independence and self-reliance as well as a tool to attract foreign investments and bring skilled talent who would otherwise not be there. Hundreds of expats living in Vanuatu are directly or indirectly related to the OFC. The setup has been in place in Vanuatu since 1970, and it should be protected and nurtured by the government. It should not be written off for nothing based on ideology of foreign advisers.
Vanuatu is currently one of the few countries that does not have formal TINs and does not collect income data on individuals and corporations. Within the next few years this could become a real asset for Vanuatu. This could help establish strong and unique strategic positioning as a tax jurisdiction by offering freedom and independence in a World which is closing down, and everything is becoming standardized and uniform. Such unique jurisdiction would help attract many new foreign investors in the coming years, potentially many more than we have seen previously.
Residential taxation VS Territorial taxation VS no personal income tax
Currently, Vanuatu is in the group of 18 countries and territories which do not impose Income taxation. On the other end of the spectrum, there is a large number of large and developed economies which have territorial Income taxation.
The proposition led by Australia specialists advocates for a tax regime that will directly move Vanuatu from one end of the spectrum to the other, without any consideration for our country size, tax jurisdiction positioning, and implications for the Offshore Financial Centre.
Residential taxation should not be considered
It is the current proposition to move Vanuatu from No Income Tax to the other end of the spectrum, by implementing a worldwide source tax (Residential taxation base).
If Vanuatu decides to implement Income tax, it should firstly move to a group of countries that tax only local income and not foreign income i.e. territorial taxation.
Territorial taxation is the “middle ground” between No Income Taxes and Residential taxation. It is implemented in a number of countries which are similar to Vanuatu: French Polynesia, Marshall Islands, Micronesia, Palau, Tuvalu, Singapore, Hong Kong, Seychelles and 25 others. Territorial taxation could one day be the first step to introduction of income taxes as it would not kill foreign investment and tax jurisdiction attractiveness overnight.
Conclusions and final recommendations
We strongly urge the Revenue Review Committee to reconsider Vanuatu tax system changes now proposed by foreign advisors.
The Vanuatu tax reform decisions are not being made independently – they are guided by First World Countries which do not have the interest of the Vanuatu nation as a priority. The reforms are not a good fit for our country and will negatively affect the people of Vanuatu.
We would like the Government to review alternative systems for raising public revenue. Modernizing the Offshore Financial Centre could help bring in additional public revenues. Together with other fiscal reforms such as raising VAT rate, reviewing business license and fees, and potentially introducing land value taxation, it would help bring the needed public revenues.
Strategy Labs of Europe has completed an independent study on Vanuatu taxation alternatives. It concludes that raising VAT to 17½% and other adjustments would raise more revenue than Income Tax and not scare off Foreign Direct Investment. This study can be downloaded from www.revenuereview.gov.vu Click on SUBMISSIONS then the first entry from the VCCI, which is entitled Vanuatu Revenue Review Feedback. Signed, Thomas Bayer, President of VCCI”
After struggling with the tropical cyclone Pam in 2015 and international airport runway infrastructure works in 2016, in 2017, all existing local businesses are currently planning an exit strategy to restructure their businesses with reduced employment, relocate overseas, or close down the business operations and cease to exist, to anticipate the negative impacts the introduction of Personal Income Tax and Corporate Income Tax would cause to the economy of Vanuatu. At the 5th Australia-Vanuatu Business Forum in Port Vila on 28 February 2017, it was anticipated that Foreign Direct Investment (FDI) trends in Vanuatu would drop following the introduction of Personal Income Tax and Corporate Income Tax in Vanuatu. It is also anticipated that goods and services’ prices would sharply increase to cover the costs of personal income tax and corporate income tax.
If Vanuatu is not yet ready for the introduction of Personal Income Tax and Corporate Income Tax to be paid by only 10,000 people out of a population of more than 280,000 people, what would be the options left for Vanuatu to pay for its national expenditure?
Vanuatu is to look for and focus on alternative tax options and strengthening its systemic commitment to free markets, friendly regulatory systems and very strong rule of law to finance its education, health, security, infrastructure development, foreign affairs, national debt, area council and provinces.
Vanuatu’s competitive advantage is to develop its economy, education, health, security, infrastructure development, foreign affairs, area councils and provinces, and pay its national debt by choosing this innovative step forward of no income tax, compared to regional Pacific Island countries.
HC Da Rin (4th from right) with WEAV members and ITC design team during training at the VCCI
Australian High Commissioner Da Rin paid a visit to the hat weavers trained by International Trade Centre (ITC) international consultants and design team in Port Vila. VCCI has been hosting several sessions of training offered by ITC to the women in handicraft affiliated with Women’s Export Association Vanuatu (WEAV).
The hats are made for export to create income for the weavers who need to supplement their family budgets for school and health fees.
“These hats are beautiful and the world must know about them and the creative skills of the Vanuatu mothers who make them”, said Torek Farhadi, senior adviser at the Geneva based International Trade Centre, an agency of the United Nations (UN). The project is financed by the Australian Department of Foreign Affairs and Trade (DFAT) as part of a Pacific Women Economic Empowerment Programme.
Empowering women through highlighting and offering their creativity and products in global markets create a new stream of income for Vanuatu through exports. It also encourages potential tourists who see these hats in high end stores abroad to visit this beautiful country and meet the weavers in person. “In the future WEAV can also offer weaving classes to visiting tourists” said Farhadi.
“Vanuatu’s handicraft is too beautiful to be overlooked” said Farhadi. With this training, we have seen that younger and older generations learning new techniques. “The mothers make the hats and the younger generation is already thinking how to market them on line”, said Serah Tari, WEAV coordinator.
High Commissioner Da Rin congratulated the Mothers for their fine work and said she looks forward to purchasing her Vanuatu hat from a store in Australia soon.
The Pacific Agreement on Closer Economic Relations or PACER Plus negotiations is getting no-where. If Australia and New Zealand are serious about pursuing trade policy with the Pacific islands that will stimulate economic development, greater political leadership as well as strategy rethinking are needed. While a few Pacific negotiators are happy with the way the negotiation stages are going, most have been disappointed with the PACERPlus talks. Most negotiators are saying that Australia and New Zealand have to think strategically and make offers that will be accepted as at the moment there is really nothing of value for the Pacific Island states in the agreement. Until something of interest is placed on the table, it seems PACERPlus won’t be going anywhere.
Papua New Guinea (PNG), a large Melanesian nation within the Pacific region with large amounts of natural resources at its disposal refused to enter into the PACERPlus trade negotiations because there is nothing in this trade agreement for PNG and the Forum Island states as stated by one of the country’s ministers. While Fiji is participating in the negotiation with reservations, on the benefits from enhanced regional trade and economic integration, other island states should take their time to review the entire working document before moving any further into the negotiations.
Dr. Roman Grynberg, a well-respected Economist who worked before for the Pacific Islands Forum Secretariat spoke against the content of the PACER Plus trade agreement and its implementation schedules. He said the trade agreement will not benefit anyone except Australia and New Zealand. Businesses in the Pacific who have worked with Dr. Grynberg would agree entirely with his views. It is not rocket science or one does not need to be an economist to read between the lines to see where this trade agreement is heading.
The Vanuatu Chamber of Commerce & Industry (VCCI) is calling on the Vanuatu Government, the Opposition, all MPs and all national leaders to take their time to read through the entire trade agreement document before deciding on Vanuatu’s next move. Vanuatu should not rely entirely on the advice given by a few of its trade negotiators and the Office of the Chief Trade Advisor (OCTA) based in Port Vila. The VCCI is happy to work closely with the Vanuatu Government to weigh the pros and cons of this trade agreement before an official stand can be taken whether to sign the agreement or not.
A series of short practical articles on keeping our businesses running well and smoothly.
We are used to keeping our car or vehicle engines tuned, we top up the oil, we try not to run out of petrol, we keep them clean, we have our cars serviced – if we don’t the vehicle breaks down, we use more fuel, it is inefficient, it will often let us down, it will not last as long, it will be a waste of money.
We need to apply the same thinking to our business. If we don’t tune up our business regularly we will lose money, we will lose staff, we will lose customers and market position, we will encourage our competitors to overtake us – we may even go out of business.
During this short series of articles Chris Elphick takes us through a service check for our business.
Today the focus is on looking after the money!
We are in business to make money – we need to pay our bills, we need to pay our staff, we want to pay ourselves and make a profit!
Regular, good quality financial management will help you to:
- Compare actual performance against planned performance
- Understand your income and expenses cycle
- Help to maximise your business efficiency
- Check how your business is going overall and convince others e.g. banks if required.
Research show the most common factors contributing to poor financial business performance are:
- Poor financial management
- Failure to plan properly
- Failure to understand basic financial ratios, such as price, volume, costs and break-even points
- No RISK management strategy, particularly from a financial and cash flow perspective
- Failure to manage growth
- No transition (exit) or succession planning strategy
Although the finances don’t drive the business (good marketing, good products and excellent service does that), your business cannot open if there is not enough money to open the doors, cannot survive short term if the cash flow is insufficient and cannot survive long term if the profit margins are too low
The primary business objective must be to make as much profit as possible. Unless you make a profit you will be unable to achieve any of your other goals – employing people, having the lifestyle you want, supporting your family, supporting your community or investing in future growth.
Remember the criteria is to make more profit, not more turnover. It is pointless to increase turnover, sell more but not make any more profit. That way we end up working harder but not smarter.
There are three components that reward you for being in business. Firstly, return on effort: evaluate the net profit from your business against the time you have spent producing that profit. Secondly, return on capital invested: not only are you working 40+ hours a week, but you had to invest your own money into this business to earn profits; and thirdly, return for risk: the risk involved in being in business is considerable.
It is also important to understand the distinction between cash and profit.
- Cash is the money we have available in the Bank to spend.
- Profit is the difference between income we receive and the expenses we pay.
As our cash balance does not necessarily follow closely to our profitability – it is not sufficient to monitor profitability – in order to survive, we must monitor cashflow as well.
There are several factors which, singly or combined, will be the cause of cashflow problems in a business:
- Rapid growth of business
- Downturn of business
- Poor management and planning
- Unrealistic demands
We need to know if the shortfall is permanent or temporary which will take some analysis of the facts and figures.
However, if the problem has been continuous, the business is growing and no other causes seem to apply, it is likely to be a permanent shortfall. If the shortfall in working capital is identified as a permanent problem, the following remedies should be considered first: Capital Injection; Bank Loan; Sell Surplus Fixed Assets or Equity Finance
Short term cashflow shortages will benefit from the following strategies: Reduce Drawings; Improve Profitability; Decrease Stock or Negotiate with Suppliers
Cashflow projections are important for all businesses and especially for smaller ones where there is often no spare finance.
- What do they include? – all incoming cash, revenue from trading, loans, tax refund, grants. All cash expenditure, expenses, purchase of assets, drawings, tax payments, loan repayments.
- What they show – what is projected to happen to the cash situation of the business if events fall as predicted, the closing bank balance or overdraft level at the end of each month.
- What they help with – seeing the effect of your predictions before they happen, identifying where future cashflow problems may occur, identify the effect of seasonality on your cashflow.
Remember that cashflows are only as good as the assumptions made to prepare them:
- Ensure assumptions are sound.
- Prepare a range of projections over a range of income and expense levels, i.e. pessimistic, most likely, optimistic.
- Use the number crunching power of the computer to calculate maximum overdraft likely.
- Get expert assistance in preparing or reviewing projections to test your assumptions. Use your accountant or talk to your bank manager. As Bankers tend to take these projections very seriously, take a lot of care when presenting your cashflow to a Banker.
Finally let us remember how we make money. We make money by increasing our profits which is done in three ways:
By increasing prices By selling more By decreasing costs.
Most businesses have to do some of each but the key is to make decisions based on good planning and forward thinking. Burying our head in the sand if we see a problem coming is not a good business strategy! It will not make our problems go away.
Coming next – part four of our business service check-list – looking after our people
Chris Elphick is Director of Learn.fast Pacific, supporting the development of a range of businesses and organisations in Vanuatu and other Pacific countries. He is an experienced business mentor and has years of experience of working with Small & Medium Enterprises. He works in Vanuatu as a mentor, coach and trainer.
If you have a business issue for Chris to comment on please contact him at email@example.com
The term Agri-Tourism was coined especially to get businesses in the agriculture and tourism sectors to work together. It was thought that getting these businesses to collaborate will see fresh fruits, vegetables, root crops and seafood being harvested and transported with ease to hotels, resorts and restaurants in town faster. In theory it looks good however implementing the concept has its own challenges as apart from the agriculture and tourism sectors, other business sectors also come into play along the value chain.
The Vanuatu Chamber of Commerce and Industry (VCCI) as one of the main organizers of the upcoming event is calling on all business owners and operators interested in being part of the Vanuatu Agri Tourism Week event to register their interests and participate in the program.
Agri-Tourism is the new buzz word and movement throughout the world that everyone wants to be involved in. Agri-tourism is all about connecting directly with their market and customer.
No one wants to miss out being able to make a connection with their market, or in creating and developing new markets through the Agri Tourism movement. Livestock farmers, vegetable growers, tour operators and hotels are all part of the Agri Tourism chain.
The celebration begins with the launching of Vanuatu Agri Tourism Week on the 18th August 2016 at the new Convention Centre in Port Vila.
Entry to the three day event held over 18th, 19th and 20th August, is free to both exhibitors and the public.
Exhibitors are invited to participate and those that take up the offer get priority in next year’s event.
The theme for this colourful event is presented through the important message of a Healthy and Wealthy Nation.
The event will encourage and support a forum to establish, and grow many vibrant business connections between operators. For example livestock farmers and market gardeners connecting with processors and value adders to supply hotels and restaurants with genuine Vanuatu products and tastes.
Vanuatu is a remarkable nation that has a lot to offer everyone. Tour operators take visitors to see the real Vanuatu. They are also part of the Agri Tourism market and ambassadors for the country.
Transport operators will find this worthwhile. School children of all ages will discover new sites, sounds and even tastes throughout the event.
The Ministry of Trade and Industry with the Ministry of Agriculture have come together in support of this stimulus by appointing a steering and action committee to oversee the program and develop a colourful and important event. Lock the date in and become involved. You can contact Mr. Jack Lowane who is the Chairman of the steering committee on firstname.lastname@example.org or on 7799293 or the VCCI reception at email@example.com or on 27543 for more information or to register your interest.
Effective communications : ‘Wise people talk because they have something to say; fools, because they have to say something’
Communicating is something we all do all the time. Yet we are often hopeless at it! It is easy to ‘open our mouths and let our bellies rumble!’ It is harder to engage our brains and ears first before we communicate anything to anybody.
However we need to remember than even if we do not open our mouths we are communicating non-verbally by our facial expressions, our bodies, the way we stand, the way we wave our arms around and so on.
We cannot avoid communication and poor communication is costly to all businesses – it results in more accidents, mistakes, staff losses, equipment breakdowns, customer losses, relationship breakdown , loss of quality, loss of reputation, loss of $$$$.
Communication is the glue that holds the business together. No change is possible without it. Good communication has a direct link to profitability, productivity, individual satisfaction and business sustainability.
Effective communication requires us to listen without being distracted and to seek to understand the other party. All communication is 2 way – there is always a sender and receiver and the two need to relate well together in order for good communication to take place.
Good communication takes time and works best when there is a clear purpose – agreeing a job, clarifying a design, finalising a contract and so on. It requires us to take an interest in the speaker.
Awesome communication requires us to have empathy – in other words to see things from the other person’s point of view; confidence and assertiveness; a real desire to communicate and an end goal – a clear picture of why the communication is taking place and what you and the other party want out of it.
In business we communicate in a range of ways – telephone, fax, text, email, face to face, Skype, mail etc. We have a number of communication mechanisms – phone messages, emails, letters, business cards, brochures, our vehicles, our clothing, our marketing, invoices, feedback questionnaires, customer data bases, posters, websites, Facebook, you tube etc.
All our communication needs to be clear, current and concise.
All staff who communicate with other people (in other words, ALL staff and management) must be trained in effective communications. They need to be aware that tone and body language speak louder than words!
The initial communication between a potential new customer and your company has the potential to turn a customer on or off. It needs to be friendly, professional, competent and encouraging. If it is an answer phone then make sure the message is clear and that you answer it quickly! Make sure all your communication mechanisms – cards, brochures etc. – are up-to-date, relevant and customer focused.
Use every opportunity you can to communicate effectively with your customers and suppliers. Send messages on your invoices; use newsletters and topical tips; keep a good customer data base; send messages on birthdays and anniversaries of when work was done; remember annual gas appliance service, septic tank maintenance etc.; always do follow up calls to confirm that everything is OK; ask for comments on your website or testimonials; ask satisfied customers for contact details of anyone else who might be interested in what you have to offer.
Effective communication is not an optional extra for any business. You either set out to communicate effectively or you will do it in a mediocre manner that will almost certainly convey negative messages to your customers. Poor communication will drive your customers into the arms of your competition and suppliers are likely to become indifferent and disinterested in you or your business!!
Seek first to understand, then to be understood
Chris Elphick is Director of Learn.fast Pacific, supporting the development of a range of businesses and organisations in Vanuatu and other Pacific countries. He is an experienced business mentor and has years of experience of working with Small & Medium Enterprises. He works in Vanuatu as a mentor, coach and trainer.
If you have a business issue for Chris to comment on please contact him at firstname.lastname@example.org
The United Nations operational activities in the Pacific over the last 5 years (2013 to 2017) have been guided by a United Nations Development Assistance Framework (UNDAF), a strategic program that outlines the collective response of the UN system to development challenges and national priorities in 14 island nations. Another program the UN Pacific Strategy (UNPS) will be developed to carry on for a further 5 years after the UNDAF funds are exhausted. UNPS will concentrate on country level and regional development priorities.
During a consultation meeting organized by the Vanuatu Government and the UNICEF in Port Vila on Friday 5 August 2016 at the Convention Centre a spokesperson from the UN stated that the UN is ready to listen to the Pacific island states on what development goals they would like to see achieved in the next 5 years (2018 to 2022) as the UN is willing to assist technically and financially towards those goals. The Vanuatu Government through the Department of Strategic Policy, Planning & Aid Coordination revealed that after the Priority Action Agenda (PAA) ended, the government really hasn’t finalized a National Sustainable Development Plan (NSDP) yet, a document that should contain Vanuatu’s developmental needs. In the plenary sessions, the discussions that followed says it all that the PAA failed to achieve many of its goals. Although the UN is insisting that Vanuatu draws up its developmental goals with possible assistance to be provided for by the UN development arms, it could be seen that if developmental goals are developed but adequate resources are not allocated to those goals then the still to be finalized NSDP will go down the same lane the PAA went.
From the presentations it could be seen that the rural areas where the development goals should be heading have not received much assistance. Port Vila and Luganville have benefited much from the development partners including the UN but the majority of the people who were and are still in need are left out. PAA failed because many of its policy directives were either implemented only in the urban centers or were only on paper and were stored away in the shelves. The NSDP once finalized will have to be reviewed by all from the government to the Non-Government Organizations to the private sector to ensure it is workable.
In one of the presentations, adults interviewed in the rural areas stated that assistance from the developmental programs funded by donors that were supposed to reach them did not reach them. In fact the interviewees raised many issues that were raised before that there is a need for income generating activities to be developed and sustained in the rural areas to ensure community dwellers earn regular income from those activities as well as to guard against or reduce rural-urban migration. Other issues are access to funding which is now seen to be a never ending issue and access to business mentoring to ensure micro and small business entrepreneurs who initiated businesses maintain and sustain their business operations in the long term.
The private sector would like the government through the Department of Strategic Policy, Planning & Aid Coordination to finalize a draft of the NSDP as quickly as possible and have the draft circulated widely to collect as much inputs as possible. A well-documented NSDP dossier covering all 17 sustainable development goals in the yet to be developed UNPS will ensure that Vanuatu receives much developmental assistance from the UN and other development partners.