Fiji Hotel and Tourism Association, 4 July 2024 – The recent Government announcement of the National Budget for 2024/25 with the intention to further solidify a series of strategic measures aimed at bolstering the nation’s economy was received with differing levels of satisfaction and in some quarters with undisguised bristling anger.
But as national budgets go, governments around the world know that there can never be a budget to make 100% of the population totally happy.
If you were expecting a drop in the VAT and tax rates with a corresponding increase in wages and social services support, you would have been sorely disappointed because this would result in reduced tax collections and insufficient funds for infrastructure and improved health services.
If you were expecting a bigger chunk of spending to be confirmed for health services you might have been disappointed as well, except that perhaps it has become clearer where some of that critical funding is having to be poured into because of an ill conceived historical contract for health services – certainly from a national perspective anyway.
If you simply cared about seeing a $6 minimum wage rate announced for immediate implementation at the expense of the private sector (because that is where the bulk of taxes are coming from), you were probably also disappointed because the resultant spike in inflation and contraction of services and therefore reduced tax collection was not acceptable since again; there would be unexpected flow-on effects on available revenue to spend on much-needed infrastructure improvement like roads, bridge replacements, hospital upgrading, water and power reticulation and enhancing waste management services.
And we don’t care at this juncture to add to the social media rants on the comparisons to the parliamentary emoluments increases while reflecting on minimum wage increase comparisons because very few people have noted the key issue – which is to do with the process rather than the outcomes.
Generally, processes in Fiji are given very little thought – their efficiency, practicality, governance, or risk impacts and most importantly, their active relevance in today’s fast-moving and more demanding world.
Yet their effectiveness (or not), is at the very heart of how fast we can progress our need to diversify the economy, grow the required tourism projects, improve infrastructure in response to rapidly growing demand and deliver the economic outcomes that national budgets promise.
Once put in place in the public sector machinery – processes are set in stone and unable to be changed bar moving heaven and earth because the very rhythm that almost all government departments and agencies march to is set by these processes from which all other requirements, action plans and activities are set to. Even when they no longer make sense.
While processes are tossed out the very minute in the private sector, a more practical and efficient method is considered, tested and approved. Whether through simple human ingenuity that is encouraged, celebrated and rewarded, or through the adaptation of new technology and AI.
If you were like the tourism industry then you did what you usually do after providing and discussing your budget submission and hoped for the best while bracing and preparing for the worst, despite all the hints and promises that the government really did acknowledge the heavy reliance on one industry, and therefore the need to continue to support it, whilst continuing to chip away at the exhaustive efforts to diversify the economy further.
An economically stable, secure and sustainable Fiji has exactly the right strategic thrust that a budget must set out to build strongly on and we certainly applaud efforts to deliver these thematic areas.
From a tourism standpoint, there wasn’t much in the way of surprises given we are expecting a lot to be delivered with so little already at the country’s disposal, further exacerbated by infrastructure challenges that have been in place for far too long.
Although a range of clarifications will be requested that is not unusual given that finance people don’t usually go out of their way to make sense of budgets that are often delivered with facts and figures arranged in a manner often designed to shock and awe the general populace.
We imagine those expecting more were certainly shocked there wasn’t.
And those who were not expecting the wage increases to come through for the public sector were in awe of the fact that not only did this come through, but they probably heard for the first time, the very public appreciation for their hard work and the not-so subtle demand for improved productivity in return.
We also support and applaud the demand for improved productivity from the public sector – regardless of whether you were included or not in the wage increases.
The optimistic projection of an economic growth rate of 2.8% in 2024 and 3% in 2025, is expected to be driven by tourism; currently, an industry struggling to manage the increasing costs of imported fresh produce (because we cannot seem to get our agricultural sector actively engaged enough to reduce this), increasing labour costs (because we must keep training new staff to replace outward labour movements and import foreign labour to fill the skills gaps), increasing construction and renovation costs, increasing costs of ensuring power and water stays backed up (everyone knows why), increasing food costs (VAT + minimum wage increases + transportation costs).
Of all the uncertainties of where things will land – the slow-down in key neighbouring economies, continuing geopolitical tensions, outward labour mobility continuance, delayed regulatory approvals impacting the delivery of local and foreign investments and the ever-present threat of climate change and natural disasters; one thing remains constant and that is the increasing cost of business.
Which is inevitably passed on to the consumer, eventually adding to and pushing inflation up.
What’s good in the budget can also be subjective.
No change to VAT, corporate and income tax rates and the tax exemptions will continue for company dividends and branch profit remittances.
The Employment Taxation Scheme supports diversification of the workforce, while the renewed focus on renewable energy is welcomed, although we realise much work is still required in creating the right environment for this to work.
The expected growth in tourism projects through a more concerted review of regulatory agency approval processes (those set-in-stone processes we discussed earlier) through the extended low-interest investment environment support is being approached with cautious optimism.
The national minimum wage and sections of the civil servant wage increases have been welcomed by most, while the FNPF increased interest payout was even more warmly welcomed, as was the news on finally addressing the aggrieved pensioner issue.
Back to School, medical and health services, social services, education and skill development, roads and public works, water and WAF corporatisation, agriculture, immigration, and general ministry support appear to be headed in the right direction to get the services we need to be addressed.
But only if those on the receiving end utilise the budgets to improve their performance, outputs and productivity.
While the debt management, revenue and expenditure strategies we hope are taken far more seriously than in the past and that more people are held accountable for their deliveries.
We had advocated strongly against any increases to the departure tax, going up to $170 from August 2024, and then to $200 from August 2025.
This could have been cushioned somewhat with the reviewed transit exemption period reducing from 96 to 48 hours, which in turn will increase the number of passengers paying departure taxes.
Competition has ramped up from those countries we traditionally compete for visitors with that have lower tax bases, higher skilled labour accessibility at far lower overhead costs, with the added advantage of having agrarian economies that stimulate cultural food tourism through cheaper fresh produce availability.
With increased competition comes the more critical need to look for newer markets which require more expensive marketing efforts.
With tightening spending in our core markets, we can expect that our deeper reliance on imported materials (construction, white goods, food including dairy products), fuel, fresh produce and now even labour, Fiji will see reducing visitor numbers based on increasing costs to holidays here.
Disappointingly VMS for tourism isn’t quite out of the picture yet with some further work and clarification still required, as are the line-by-line clarifications on the list of indirect tax measures that have been announced.
However, consultation on this while intermittent, has been taking place so we’re hoping our recommendation on only making identified, non-compliant businesses being required to be included in the phased VMS approach be considered.
To include already confirmed, VAT-compliant businesses under VMS would be detrimental to FRCS’s strategy of seeking to create a more compliant tax business environment.
We should be supportive of tax-compliant businesses and harder on non-compliant ones – rather than treating everyone with the same distrust because the VMS inclusion does not provide FRCS with any further tax overview benefits if VAT is already being paid.
We remain hopeful about the future as we always are and will work closely with the agencies whose service deliveries are tied to the industry’s ability to continue to grow sustainably.
And to achieve this, those agencies must reflect the government’s economic strategy direction.
Fantasha Lockington – CEO, FHTA (Published in the Fiji Times on 4 July 2024)
Fiji Hotel and Tourism Association
The Voice of the Industry
