The Tonga Cabinet today passed new regulations for the new Income Tax Act, as well as introducing new Customs duty rates and regulations, and Excise duty rates and regulations. They are all gazetted today, the Prime Minister Dr Feleti Sevele said this afternoon.

These are major components of the economic reform that was launched in 2002 and the Prime Minister said that under the new Income Tax Act people in the lower income brackets would not have to pay tax.

"The tax free income for the lower income people used to be $2,500, non taxable. Now the minimum is $7,400 a year. So a lot of people will not have to pay any tax.

"The higher incomes will pay more, those above $30,000 p.a. will pay 20% whereas it is currently 10%. So it is a more graduated fairer tax system," he said.

"On duties, we now have excise duty paid on the cc capacity of a vehicle. Before we had 45% duty on overseas invoice, now it is based on the litre capacity of a vehicle. In that way people will pay less and it will also encourage people to buy newer vehicles.

"That is the way to go, less cheating, better compliance, and people will be paying the right duty."

The Prime Minister said there would be no duty "on fuel for domestic airlines."