Tonga's CTax badly timed, say PRs in budget debate [1]
Monday, June 20, 2005 - 14:15. Updated on Friday, May 9, 2014 - 16:05.
From the House, by Pesi Fonua
Tonga Legislative Assembly, Minute No. 7, Monday June 13, 2005.
The People's Representatives' Private Bill to amend the Consumption Tax will be a crunching issue before the House, which should start debate on it soon, possibly before the end of the month, meanwhile, members debating the Budget said CT was badly timed and was imposed on a struggling economy.
- While the Private Bill remains the most interesting thing before the House, the rest of the debate is like an economic review by the members - an open ended discussion.
- Finesi Funaki, the No. 1 People's Representative for Ha'apai, said that debating the budget was a waste of time because the budget had been set, so they couldn't very well disrupt it.
- The Shoreline Crisis remained a topical issue, with the revelations by 'Akilisi Pohiva and Clive Edwards that the $25 million in government concessions to Shoreline for the sake of cheap electricity, had been misused through the high salaries of executives.
- The Prime Minister responded to Lepolo Taunisila's complaint about the poor domestic air service to the Niuas by saying that government was reviewing the Domestic air aervice and they may have to advertise for a new service to operate the Domestic air service.
Plea from the Niuas
There was a plea from the only woman member, the People's Representative from Niuafo'ou and Niuatoputapu, Lepolo Taunisinga. There had been no air service to the Niuas during the past 12 months, they were having problems with the telephone service, and nothing else seemed to be going right for the Niuas.
The Prime Minister said that they were reviewing the Domestic Air service, and there was a possibility that they may have to advertise for someone to operate the domestic service.
Appalling state of elderly
'Isileli Pulu expressed concern over the lack of social services to deal with the problems, involving youth, and the elderly who were neglected and some living in an appalling state.
The Speaker reminded the House that in 2004 the House passed Act No. 14 for the establishment of a board to manage the pensions of the members of parliament. His Majesty had given his consent to the Act and the Act would come into effect on July 1. Under the Act the Speaker was to be the Chairman of the Board, and the members were one each from the Cabinet Ministers, the Noble's Representatives and the People's Representatives. He suggested that members decide among themselves who would be their representative, so that when they had a break at 11 am they would inform him.
He also informed the House that government responded promptly to the petition by the growers, for them to be exempted from the Consumption Tax. He said that Cabinet and the Privy Council with the Prince Regent had agreed for the exemption and it had already been Gazetted.
The Minister of Commerce, Hon. Dr Feleti Sevele, reminded the House that he had already made a statement way back in March that the growers would be exempted from the Comsumption Tax, so he tended to think there was no need for the drive to parliament by the growers.
Clive Edwards disagreed and pointed out that after the Acting Prime Minister, who was Feleti Sevele, made his statement the Ministry was still demanding that the importers of agricultural products pay the 15% CT and then reclaim the amount later when they sold their products to the growers. He said that the government statement was different from what was practised.
He asked the Speaker when was he going to table his Private Member's Bill for debate. He stressed that it was important for the Private Bill to be debated before the budget was passed.
The Speaker pointed out that under the House's Regulations, Public Bills came first followed by Private Bills.
Budget debate
The Legislature dissolved into the Whole House Committee and the Chairman, Noble Havea Tu'iha'angana took his chair.
'Akilisi Pohiva pointed out his belief that there no nation-building project in the budget, it was all about tax collection. He said that while the allocations for what he considered to be two key ministeries, Agriculture and Fisheries had been reduced, $182,000 for fisheries and $4.2 million for Agriculture, while the Tonga Defence Service went up to $6 million.
With regards to the 11 seniti that government offered to pay Shoreline and subsidise the power consumers, he firmly believed that Shoreline should absorb the 11 seniti. He said that government was helping Shoreline by giving them tax payers' money. He said that government had assisted Shoreline with the granting of a total of $25 million Development Licence, exempting them from paying custom duties. He wanted to know if a $7.14 million mentioned in the budget was included in the $25 million.
The Minister of Finance replied that he could not find the figure $7.14 million anywhere, but there was a $3.9 million exemption for power generation.
'Akilisi Pohiva wanted to know why government kept granting millions of tax exemption to Shoreline, a $25 million custom duty and Port and Service Tax exemption, and on top of that another $3.9 million exemption from Fuel Tax, and then government offered to pay them the 11 seniti per unit. Meanwhile, seven people in Shoreline were being paid salaries which amounted to $2 million per annum. He said that some explanation was needed to be made, because it was obvious that the Cabinet and Privy Council could not do anything about Shoreline because of the country's current political system.
The Chairman told 'Akilisi that he has completed his allocated time and it was time for another speaker.
Concern over youth
The Vava'u No. 2 People's Representative, Vili Kaufusi Helu, made his maiden speech and the members clapped.
Vili was very concerned about the state of youth, and he thought that the allocation for youth of about $10,000 was far too small, and he hoped that the Minister would increase the figure.
CT burden for Niuas
The only woman in the House and the representative of the people of Niuatoputapu and Niuafo'ou, Lepolo Taunisila, pointed out that the government's allocation for the Niuas ranged from 0 to 1%. She also pointed out that the consumption tax and the government introduced put more burden on the people of Niua who were already having a difficult time with very little sources of income. She pointed out that by the time consumer goods reach the Niuas, with the added tax very few people could afford to buy them.
She pleaded with government to introduce a source of revenue for the people of the Niuas to take the place of copra.
Lepolo, a teacher, had a lot to say about education. She pointed out there was a discrepancy between the increasing number of qualified teachers with diplomas and degrees who are teaching and the number of students who successfully completed high schools. She said that there was an increasing number of drop outs and 40% to 50% failed their final year exam. She said there was a desperate need for a program to cater for this increasing number of young people who otherwise would engage in all sorts of undesirable social problems.
She said that there should be 10 deputy directors of education to handle the centralised work load of the Ministry of Education. She said that the current set up could not handle the work demand, and a request from the Niuas for example for a toner for their photocopies could take months, because it was difficult to find anyone in the office to handle their request, and the working procedure for them to write a voucher and the fact that the ship came over every two months, they could be waiting for months for a toner. She said that the Ministry of Education was administered by people with the wrong qualifications, BAs in history and BSC.
House Pensions Board
After lunch the Speaker announced the board to manage the pension of the House. The Chairman was the Speaker, Noble Veikune, and the other members were the Minister of Finance, Siosiua 'Utoikamanu, Noble Tu'iha'ateiho and Sunia Fili.
Lepolo continued with her maiden speech. She proposed for government to be strict with the retiring age of between 50 and 55 years, and people should retire to make room for young people. With regards to the health services she said that the emphasis at the moment focused at Vaiola Hospital, but she could not see how that would be able to improve the service at the Hospital Likamonuu in Niuatoputapu and Tu'akifalelei in Niuafo'ou.
With regards to transport and communication, she said that they had not had an air service for a year and the telephone was too expensive, so that most of the telephones on the islands have been disconnected. She called for government to increase the number of trips the Olovaha makes annually to the Niuas from six to ten.
The Prime Minister responded to Lepolo's complaint about the poor domestic air service by saying that government was reviewing the Domestic Air Service and they may have to advertise for a new service to operate the Domestic Air Service.
Lepolo finished her speech with the parable of the good shephard who left the 99 sheep behind and went out looking for the one missing sheep. She asked for government to remember the Niuas despite the small population and their isolation.
Budget deficit
'Isileli Pulu took the floor and started off by expressing his concern over the budget deficit of $9.2 million. He also expressed his concern over the youth which he said made up 53% of the population but very little in the budget that was directed at addressing the needs of youths. He said that the other neglected sector of the society were the under privileges and the elderly.
'Isileli went on to stress the point that the budget was not in line with the reform program that was launched in 2002 and it was also out of step with vision stressed in the Budget Statement. The budget consisted of measures to collect tax.
'Isi said that the GDP dropped from $293.9 million the year before to $297.7 last year. He said that at the same time remittances from Tongans overseas amounted to $180 million. He said that the government foreign debt as of April 2005 was $153.3million, the government domestic debt was $25.5 million, so the total government debt was $178.8 million.
Noble Veikune was next to take the floor. He praised the government for its commitment to offer service to the people. He said that the allocation of $25 million for the Ministry of Health and $26 for the Ministry of Education were indications of the government's commitment, taking into account that it would probably less than half of these total expenditures would be recovered from these ministeries.
He called on members to support the government budget, because the alternative would be for the public to start paying for these services without any government subsidies.
He queried the $18.7 millions from Other Revenues and asked if it included all dividends from all public enterprises.
He also queried the Revenue Ratio which was supposed to increase to 96% in the coming financial year from 90% last year, taking into account an increase in the Net Borrowing requirement of government.
He asked the Minister of Finance to give an estimated figure on the government's Return on Investment?
With regards to concern over the 100% increase in the budget of the Tonga Defence Services he believed that the House could help the struggling economy of the country by being thriftful with their spending.
'Akilisi Pohiva wanted to know when the Minister of Finance was going to answer to some of the questions that had been asked, but the minister replied that he needed time to prepared his answers.
CTax painful for the people
Fineasi Funake took the floor. Fineasi said he was reiterating a point he made in 2003 that the House was wasting its time debating the budget at this stage, because all their good ideas should have been made when the budget was still at its drafting stage so that all their good ideas could be incorporated, but as far as he was concerned it was already too late for members to make any contribution.
He said that the introduction of the CT was badly timed. He said that in countries that had introduced CT there were a number of things that they had to do first. In Australia he said, firstly they boosted the economy, the same thing in New Zealand, and in Fiji. Not with Tonga, the CT was introduced at a point when the economy was struggling, and therefore was very painful for the people and that was why they were crying.
He asked the Acting Minister of Education what was he going to use the $10 million increase in the budget of the Ministry of Education. The acting Minister replied for the member to continue with his speech and he would answer him later.
The Prime Minister alluded that the increase was to pay church schools and that church leaders supported the idea. He suggested for the member to do his homework and consult with church leaders first.
Fineasi replied that he was aware of what was going on, but the Ministry of Education was going to spend the money in rewriting school syllabus then please don't bring foreigners to do the re-writing there were already capable people here, and that was why we had been investing million in education during the past years. He believed that there was a lack of co-ordination in government and ministries were running in different directions. If the Ministry of Labour had identified that problem was a lack of skilled workers then the the Ministry of Education should redirect education to vocational and tertiary training.
Sunia Fili said that 'Etuate Lavulavu with 'Unuaki 'o Tonga shook the Ministry of Education out of its slumber.
Lack of Funds
The Prime Minister responded to the claim of lack of planning, and said that the member who was nodding away over there, half-a-sleep (meaning Clive) was one person who had a lot of plans. The government had many plans but there was the problem of the lack of funds.
The Minister of Finance responded to the query of why the low allocation for Agriculture and Fisheries. He said that the reduction in the budget of the Ministry of Agriculture by $400,000 was redirected for the establishment of the new Ministry of Forestry. He said that the small increase in Fisheries from $1.1 million to $1.2 million was simply because Fisheries was predominantly operated by the Private Sector.
He said that government assisted the growers in a number of ways, through advice given by the Ministry of Agriculture, loan capital, which was made available through the Tonga Development Bank, and tax exemption, which amounted to $3.2 million per annum. Government also guaranteed squash growers loans which amounted to over $3 million.
'Akilisi wanted to know what were three PhDs doing at the Ministry of Agriculture, whose salaries amounted to about 75% of the total allocation of the Ministry. He suggested that government should give them a tractor each and send them home.
The Minister said he could not comment on what had been said. He would consult with the Acting Minister of Agriculture first. He then went on to explain how the Tongan economy is part of the Global Economy and we had to comply with all these international financial requirements so that we could become a member of the WTO and be able to protect our economic interests.
He insisted that it was a good idea to introduce CT and that the next phase of the Tax Reform was to adjust Custom Duties next year and impose a flat rate of 15% on all imports.