The Foreign Exchange Levy Act 2015 that was originally scheduled to be implemented on 21 October, finally came into force yesterday, November 3, allowing government to collect one seniti from the banks on every pa'anga sold or purchased in foreign exchange transactions.

The delay in the implementation of the Act was because of what appeared to be a break-down in communication between government and commercial banks, and questions over the translation of the Act.

Initially, the commercial banks did not know that the Act has been enforced until late Friday, 23 October, when the CEO for the Ministry of Finance and National Planning, Tatafu Moe’aki emailed copies of the Acts before leaving for overseas on the following day.

Also out of the country were other key people who understood the Act, including the Minister of Finance and the Governor of the Reserve Bank, leaving the commercial banks wondering how to calculate the levy.

However, the CEO of the Ministry of Finance, Moeaki Tatafu has since disputed a claim by commercial banks that “nobody knows how it works, how to apply it or how to collect it”. He said that consultation with the banks on how the Foreign Exchange Levy is applied began in April 2015.

He admitted there is a slight difference in the Tongan translation of the English Act, but in this case it is the Tongan version of the law that is being applied. What they had discussed with the banks is to allow the legislation to go forward because if they were going to withhold it to readjust the original or its translation, then legally it was not allowed to be resubmitted to the House for another year.

The difference was with the Act's Clause 4 "Rate of Levy" which states that: "The levy shall be assessed and paid at a rate of one seniti imposed as part of the spread of the Pa’anga value of every purchase and sale of foreign currency".

Questions were raised regarding the interpretation of the English clause with a view to determine if the one seniti was to be applied "per transaction" or "per pa'anga".

The Tongan translation of Clause 4 "Tu'unga totongi 'o e 'inasi faka-Pule'anga" states: "Kuo pau ko e 'inasi faka-Pule'anga 'e faka-mahu'inga 'i mo totongi 'i he mahu'inga ko e seniti ' e taha 'i he tupu (spread) ' o e Pa'anga Tonga ' e taha kotoa pe 'i he fakatau mai pe fakatau atu 'o e pa'anga muli."

Moeaki said it applied to every one Pa'anga. He explained that the one seniti is deducted from every Pa'anga  of profit that a bank makes from every foreign currency transaction. He said that a bank could add on the one seniti levy for their customers to pay, and that is optional for the banks [to reduce their profit or charge their customers more], while the public could chose which bank would they like to use.

November 3

Moeaki said that because of the difficulties faced by the banks in implementing the Foreign Exchange Levy Act, government had called a press conference on 30 October to clarify procedure on how to implement the Foreign Exchange Levy Act. The new date of November 3 was announced by the Acting Minister of Finance, Hon. Tevita Lavemaau.

The Foreign Exchange Levy was introduced to allow government to collect funds to assist the Pacific Games Organizing Committee in their preparations to host the 2019 Pacific Games.