By Mary Lyn Fonua

Income tax cuts for individuals and sole traders from July 1 means all income taxpayers in Tonga will pay less. The tax-free income level will be raised from the first $10,000 to the first $12,000 pa'anga earned in the new financial year, with further adjustments in tax thresholds easing higher income tax levels.

Taniela Sila, Deputy CEO for Revenue, said yesterday that the easing in the income tax rates was decided in an annual policy review that had begun last November.

“We considered the economic situation, and things like natural events, and the COVID-19 emergency, but most of all tried to be fair.”

However, while the government will collect less income tax, Taniela said this means they will have to recover the loss of their revenues by imposing taxes elsewhere.

“We don’t know where new taxes will be, it’s still being discussed,” he said.

Consultation

Yesterday the Tonga Ministry of Revenue and Customs explained the new lower income tax rates to the Tonga Chamber of Commerce and Industry Inc. in a consultation for businesses. Presentations were given by Pita Tu'ivai, Principal Revenue Officer (Revenue) and 'Esafe Tokai, Principal Revenue Officer (Customs).

The current 10% income tax will be applied on income between $12,000 and $30,000 per annum.

For earnings between $30,001 and $50,000, the rate will be reduced from 20% to 15%.

Earnings between $50,0001 and $70,000 are subject to a $20% tax rate.

Earnings over $70,001 are subject to a 25% tax rate.

The Ministry of Revenue and Customs showed income tax savings for individuals across the board:

New income tax worksheets will be posted on the Ministry of Revenue and Customs website later.