A new tax regime for small businesses in Tonga, offering flat tax rates on turnovers of under $100,000, has been drawn up by government in a proposed amendment to Tonga's Income Tax Act 2007.

The flat rate on turnover will not be offered to companies, who remain taxed on chargeable income.

A statement from the Ministry of Revenue yesterday said the new flat rates on turnovers would reduce the record-keeping requirements for small businesses, who would not have to file detailed tax returns.

It would also reduce the costs of the Ministry devoted to small businesses.

The proposed flat rates  are divided into four tax categories:

• Turnover $0 - $10,000 at $100 flat

• Turnover $10,001 - $30,000 at $250 flat

• Turnover 30,001 - $50,000 at $500 flat

• Turnover $50,001 - $100,000 at 2%

However, it is not expected that the cost-saving changes will make any difference to the amount of tax collected.

"To ensure equity Government is committed to ensure that the tax paid under the current system is not significantly different from the tax paid under the proposed rates," the Ministry of Revenue stated

Small businesses will also have an option to remain with the current income tax rates.  Currently small businesses are taxed at 10% for chargeable income between $7,400-$30,000, and 20% on the chargeable income of $30,001 and over.

The Ministry of Revenue stated that is welcomed all submissions and comments regarding the proposed changes, which may be directed to Lepaola Vaea, Teisa Pohiva, or 'Aisea Latu. Before 27 March 2013