Tonga's Minister of Finance, Hon. Siosiua 'Utoikamanu intends to meet a big deficit of $10 million in his current 2006-07 Budget by pressuring businesses to pay up tax arrears, he told the Tongan Parliament on Monday, June 18, in a matter of fact statement that also noted that 154 businesses were destroyed on November 16, suffering damage valued at $120 million.

With the end of the government's financial year approaching on June 30, he said that the deficit in his 2006-07 budget had jumped from $4 million to $10 million because of two major events that took place in 2006. The death of King Taufa'ahau Tupou IV cost the government $1 million and then the destruction in Nuku'alofa on 16/11, had destroyed 154 businesses.

He said it had cost government $3-5 million to clean up the capital and at the same time there was a loss of $7-$8 million revenue from custom duties because of the closure of the wharf and airport and a drop in imports by burnt-out businesses.

He noted that the businesses suffered losses valued at about $120 million.

$6m less

The government's Estimated Budget for 2007-08 is $152 million, $6 million less than the current year of $158 million.

The Minister forecasted a big drop Income tax revenue from the estimated $26 million collected during 2006-07 to $20.5 million in the coming financial year. The loss in revenue is due to the impact on the economy as a whole of the loss of businesses on November 16. He also pointed out that inevitably there will also be a drop in the collection of revenue from Custom duties because of the introduction of a 20% flat rate for all import goods.

The Minister, however was hopeful that imports would stabilise and revenue from Customs Duties and Consumption Tax will pick up.

He estimated that sales of government businesses and dividends from government's investment would bring in $11.4 million.

Fees increase

He said that fees and charges for government services had remained unchanged since 2002, and it would have to go up. The sales of government bonds is expected to bring in $6.3 million.

He was confident that government revenue would pick up and in the end there will be a balance budget.

Loan from China

The Minister told the House that government is also negotiating to borrow $100 million from China and $25 million from the Asian Development Bank. The Chinese loan has been earmarked for "the reconstruction of Nuku'alofa", and to finance an Urban Development Project, but a detailed plan of the two loans would be presented to the House in due course.