From the House, an English translation summary from the Tongan vernacular, by Pesi Fonua. Tonga Legislative Assembly, Minute No. 8, June 25, 2007.

- The Minister for Youth and Sports said that only about 10% of school leavers could find employment locally.

- The Minister of Finance explained that the accumulated fund from the levy would go straight to finance technical training.

- Noble Luani queried why they were still debating the levy when they had already passed the Bill for the Income Tax Act to which the Levy was attached.

- The Prime Minister said that the alternative for the levy is to cut down on some of the allocations for votes, like the vote of the House.

- Clive Edwards complained to the Chairman to stop the Minister of Tourism from calling him a liar.

- 'Akilisi Pohiva proposed for government to draft a new tax law to lower the profit of some private companies.

Monday June 25, 2007:

AFTER the Legislature dissolved into the Whole House Committee, the Chairman, Noble Tu'ilakepa took his Chair.

'Uliti Uata expressed his opposition to the levy of 1% that is attached to income tax. He said that the purpose is for the running of workshops for public servants, which are usually just a waste of time.

The Minister for Youth and Sports pointed out the desperate need to offer technical training to school leavers so that they may find employment. He said that only about 10% of school leavers could find employment [locally] and to find employment overseas they needed skills.

Lepolo Taunisila supported the idea to help the youth, and try to overcome the problem of unemployment. She supported the idea of a levy.

Samiu Vaipulu disagreed with the concept of levy. He supported the idea for a technical training facility but disagreed with the idea of a levy to finance such a facility. He proposed that there must be a better way of financing such an institution.

Levy to be added

Noble Luani queried why they were still debating the levy when they had already passed the Bill for the Income Tax Act to which the Levy was attached.

Sunia Fili pointed out that the levy is a part of the Bill, but it will be added on by the Privy Council with an Order in Council.

The Minister of Finance explained that the accumulated fund from the levy would go straight to finance technical training. He said it would be a similar source of funding to a Revolving Fund facility.

Clive Edwards wanted to know what fund the levy will be based on: is it the $20 million revenue from Income Tax that they hoped to collect in the coming financial year?

The Minister of Finance said that the 1% levy would come from the $4 to $5 million personal income tax.

Clive Edwards said that the approach was not fair, because it taxed the private citizen but not the private companies, which made more money. He wanted the Minister to clarify, because in his calculation $11 million will be from Personal Income Tax and $9 million from the 1% levy.

Payroll deduction

The Minister said that the levy concept deducted from the Payroll of all civil servants and employees in the Private Sector. He said that Fiji adopted a similar approach.

Clive expressed his opposition to the levy. He said that the little amount that government hoped to collect from the 1% levy, could not match the millions of subsidies that government offered. He also queried the termination of Stamp Duty, a source of revenue for government.

The Minister of Tourism pointed out that the people who they labelled as low-income earners, those that earn less than $7,400 per annum are income tax free and they don't pay the levy, and so are the Private Sector. He said that this approach is used in other parts of the world.

Clive responded that the only mention where levy is used was in Fiji, and Fiji is one place where there is civil strife. Is that what he wants?

The Minister said that Clive was wrong and that levies are imposed in Fiji, Australia, New Zealand and the USA.

Clive asked the Chairman to stop using the word lie. He told the member to stop lying.

The Minister told the member to calm down, because he is probably a bigger liar than him.

Clive complained to the Chairman to stop the Minister from saying things like that in the House.

The Deputy Prime Minister said that both Australia and New Zealand have levies. In Australia it is known as Medicare Levy. He said that in New Zealand when a New Zealander is rushed into the intensive care unit, there is a free service paid for with a levy that has been deducted from the payroll of citizens of New Zealand.

Clive said that in New Zealand there is an Accident Compensation Act, but there is no levy. He insisted that the levy should not be a part of the budget.

Samiu Vaipulu also expressed his opposition to the levy. He supported the idea of making a fund available for Technical Training but did not like the idea of collecting levy. He suggested that they should think of another way, other than a levy.

Lepolo Taunisila supported the idea mentioned by the Minister of Tourism that the 1% levy was a small sacrifice to collect $400- 500,000 but she suggested for the Minister to just take the money out of his vote for overseas travelling and for new vehicles.

Clive reminded the member that the Minister for Tourism had already spent the money and bought two new vehicles.

The Minister of Tourism told the member that he was lying again.

Clive again wanted to stop the Minister from using the expression, "lying". He said that the Minister was driving around in a new vehicle and he wanted to know whether or not it had been bought by his ministry.

The Minister of Tourism said that a new vehicle had been bought by his ministry and it had no connection with the new budget, as he alluded.

Clive insisted for the Minister to tell him how much he spent on the new vehicle.

The Minister asked the member how many millions pa'anga of tax payers money did he and his Chinese friends try to avoid paying government. How much?

Clive responded that the Minister should answer his question.

Misunderstanding

The Prime Minister said it was unfortunate that there was so much misunderstanding over the 1% levy. The levy is calculated only on taxable income. A tax payer with a salary of $10,000 will be exempt from tax on the first $7,400. If the remaining amount is $2,000, he will be taxed 10% and that is $200; and then a 1% levy and that is $20. He said that the amount they hoped to collect is about four to five hundred thousands, not a big amount but the intention is to help the youth of Tonga, by some of us who have got a salary. He reminded the House of the king's speech from the throne at the opening of parliament that during the coming five years, 90% of school leavers should have some technical training.

He said that government was prepared to withdraw the levy idea and reintroduce it next year. He said that the alternative for the levy is to cut down on some of the allocations for votes, like the vote of the House.

'Uliti Uata thanked the PM for his decision to withdraw the levy, and suggested to get money for technical training, by cutting from the votes of the Ministries of Tourism and Defence.

Consumption Tax extended

On a separate issue 'Uliti said that government proposed to apply 15% consumption tax to all growers and fishermen.

The Minister of Finance said that the CT is applied to people in the agriculture and the fisheries sectors whose sales reached $100,000 per annum. The new threshold for Income Tax has been raised to $7,500, so a majority of people in these sectors do not pay any taxes. He said that the number of Tongans who are commercial farmers and commercial fisherman numbered about five or six.

Loans

When the House resumed its afternoon session after lunch, the Speaker called on the clerk to read a letter of motion for two resolutions from the Minister of Finance.

The motion was for the House to pass two resolutions authorising the Minister of Finance for government to borrow more than $15 million within one year. There are two loans: one from the Asian Development Bank and the other from the China Export and Import Bank.

The Legislature dissolved into Committee and the Chairman, Noble Tu'ilakepa took his chair.

'Osai Latu expressed his concern with a lack of repair and maintenance of government properties, for example the Ha'apai High School. He said that since it was built in 2001 there had been no repair or maintenance done to the buildings. He said that they were having problems with their septic tank at the school.

On a separate issue he pleaded for government to withhold the taxing of people in the fisheries and agriculture sectors for another year.

Lepolo Taunisila expressed her concern about the need for social reform, law and order and political reform. She also expressed her concern about a number of development programs for the Niuas were mentioned in the budget but she did not see any allocation of funds. In addition subsidies for shipping and air transport to the Niuas, which were usually amounted to $2 million were not in the budget. She said that air transport to the Niuas was cheaper during the 1980s, than it is today. A return air ticket to the Niuas costs $1000 pa'anga.

The Minister of Finance pointed out to the member that the subsidy for air transport to the Niuas for 2007-08 is $160,000; and for sea transport, $195,000. He said that the Prime Minister had designated a $5 million grant from China for road maintenance in Tongatapu and the outer islands.

Call for heavier company tax

'Akilisi Pohiva wanted to go back to the issue of the proposed taxing of commercial farmers and commercial fishermen, and said that he had a proposal for government to think about. Some of the Tax Bills that they had passed were like very fine fishing nets that would catch fish of all sizes. He proposed for government to draft a new tax law to lower the profit of some private companies, which are making thousands and millions of pa'anga in profit. He said that there are probably about seven profitable companies, including the Westpac bank of Tonga with a net profit of $7 million, the ANZ Bank with about $5 million, Royal Beer with thousands of pa'anga in profit, MBF Ban, about $1 million and the Duty Free. He said that for Westpac to make $7 million profit in Tonga was far too much.

He suggested that once a business makes $1 million net profit it should be taxed 40%. He said that this was the practice in Fiji and New Zealand. He reminded the minister that the Westpac's $7 million net profit was big, and 60% of it will go overseas. He said that $5 million earned by ANZ and the how many million that MBF earned would also go overseas.

He proposed for a new company taxing system, so that the more profit they make the more tax they should pay. He suggested for company taxes to increase progressively from 20% to 60%.

The Minister of Labour Commerce and Industries said that the comment made by the member about Royal Beer was not fair, considering that he had given him information about Royal Beer.

'Akilisi said he did not believe the information that the minister distributed in the house about Royal Beer.

[Minute no. 8 to be continued].