Tonga's new foreign exchange levy starts 1 June to pay for Pacific Games [1]
Thursday, May 12, 2016 - 17:32. Updated on Thursday, May 12, 2016 - 22:03.
Half a seniti of "the bank's spread" of every pa'anga that is bought and sold through Tonga's foreign exchange services will be charged, starting 1 June 2016, after a foreign exchange levy was endorsed by Tonga’s government to help fund the 2019 Pacific Games.
The half seniti levy applies only to the bank's spread which is the amount of money the bank makes and not the amount of the whole transaction. (The spread is simply the difference between the price at which a dealer will buy a currency and the price at which the dealer will sell a currency.)
Tonga's largest source of foreign exchange inflow are remittances. For the month of January, the National Reserve Bank of Tonga recorded remittances amounting to $17.3 million pa'anga.
In a statement released by the Tongan Government today, the new legislation directs every financial institution, bank and money transfer operator such as Western Union and Money Gram to collect the levy from every purchase or sale of foreign currency in Tonga. The amount collected will be paid to government on a monthly basis.
The Minister for Finance and National Planning, Hon. ‘Aisake Eke said the proceeds from the levy are included in the 2016-17 budget and will help the Tongan government finance the 2019 South Pacific Games.
“This levy will be repealed at the end of June 2020 after the games,” he said.
The statement also stated that the Ministry of Finance and National Planning conducted consultations with key stakeholders since April last year to ensure the levy is applied and collected properly.
The Foreign Exchange Levy (Amendment) Act 2016 will be Gazetted to be effective from 1 June 2016 after it was granted Royal Assent by His Majesty's Privy Council on 28 April 2016.