Download PITAA REGIONAL WORKSHOP 11/2015 * FORECASTING TAX

VANUATU.
Vanuatu’s Economy has a lot of Challenges.

Geographical setup of 83 Habitat Islands (Some very remote), 260,000+
population makes spreading of resources very challenging.

Vulnerable to common natural disasters

March 2015 - CYCLONE PAM (Still recovering)

14 of our 52 members of Parliament were jailed for bribery. President
dissolved parliament.

SNAP election on the 22nd of January 2016.

Quantas , Virgin Airlines, Air New Zealand, Solomon Airline have ceased
operating flights to Vanuatu due to Runway Conditions.
These Challenges have given us the strength to
reform, re-design, rescope and better plan for
a more challenging future that is a head of us.
Our Current Efforts now is to strife towards
achieving an EDUCATED, HEALTH and
WEALTH VANUATU
(Vanuatu National sustainable development plan theme)
Category
GDP Growth Rate
Inflation Rate
Debt to GDP %
Year
2012
1.8%
0.8
19%
2013
2.0%
1.5
19%
2014
2.3%
1.1
20%
2015
2.4%
25%
Debt to GDP may slightly increase again towards the end of this year
2016, but the aim is to keep it manageable

Vanuatu still does not implement any forms of direct taxation such as
income tax, Corporate tax etc.

Vanuatu has a variety of both Tax and Non Tax revenues that the
government collects annually.

Vanuatu is currently undergoing a major review in its Tax regimes with
the intention of not to only introduce new taxes but to also review
current / existing taxes.

Since the 1980’s Vanuatu has encouraged the growth of its economy by
promoting its tax haven status.

Vanuatu is already a member of the OECD Global Forum but is yet to
gets its Tax legislation approved by parliament. This is likely to occur
before the end of the year.

Earlier this Month, Vanuatu announced its commitment to Automatic
Exchange of Information for tax purposes,. This is a commitment for all
OECD member state countries.
In Vanuatu, revenue forecasting are done online using the Vanuatu
Financial Management Information system (FMIS). Initially Revenue
forecasting are done at individual Ministries and Department level
Tax Policy Unit located within the Treasury Division of the Ministry of
Finance and Economic Management then meet with individual revenue
collecting agencies to discuss their forecasts and do adjustments where
appropriate. Changes are made accordingly before they are presented to a
Ministerial Budget committee who finally endorses the forecast for a new
financial year.
The Government is obligate to present a balance budget in Parliament thus
Revenue forecast must be able to carter for the overall forecasted
expenditure of any new financial year.
In Vanuatu, most revenue forecast are done based on a historical Actual
revenue trends being collected. Usually a 3 year period is preferred.
Some Ministries do have their own sets of frameworks that they can use
to forecast their revenue targets while others will rely very much the
expected level of activities.

For instance the Department of Customs and Inland Revenue will
need to obtain the recent national GDP growth rate, to initially do a
forecast on VAT collection for a new financial year.

On the other hand the Non Tax Revenue (Fees and Charges) collected
from any other sectors depends very much on the expected level of
activity and its demand (e.g.). Passport fees which are usually
collected through application fees
TOP 3 major revenue source:
1.
Value Added Tax, (VAT)
2.
IMPORT DUTIES,
3.
EXCISE
Note :
• All above mentioned revenue are collected by
Department of Customs and Inland Revenue
Annual Revenue in VATU
Description
2010
2011
2012
2013
2014
2015
% Share of VAT to total
Revenue
30.3%
31.9%
32.7%
36.4%
35.8%
35.5%
% Share of Import Duties
to total Revenue
17.5%
18.2%
16%
16.9%
16%
16.8%
% Share of Excise to
total Revenue
12.4%
12.2%
11.8%
12.1%
11.8%
12.4%
60.2%
62.3%
60.5%
65.4%
63.6%
64.7%
Overall total % Share
6 Years
Average
%
33.8%
16.9%
12.1%
62.8%
The Remaining 38% of National Revenue are collected through various fees and Charges (Non
tax Revenue items). For instance, The Vanuatu Economic Rehabilitation Program, managed by
the Vanuatu Citizenship office, contribute some 6.5% to overall revenue annually.
Major Sectors.
Years.
2012
2013
2014
2015
Agriculture Sector
21%
21%
22%
22%
Industry Sector
9%
7%
7%
8%
Service Sector
64%
66%
65%
64%
Forecast: 2016
1. Agriculture sector will like to pick after improved weather pattern lately.
2. Industry sector most likely to pick up, as result to reconstruction activities
after cyclone PAM and new Government public projects currently
underway.
3. Service sector is likely to be affected (decline) in 2015 due to major damage
caused to resorts and bangalows and also the current International Airport
Maintenance works
Vanuatu Top 10 Major Imported goods
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Cigarette & Tobacco
Distillate Fuel
Jet Fuel and Aviation Kerosene
Motor Spriits
Motor Vehicles Transports
Personel and Household Effects
Pharmaceutical Products
Cement
Rice
Wheat Flour
Vanuatu Top 14 Exported Products
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Copra
Coconut Oil
Beef Veal
Cocoa
Shell
Cowhides
Kava
Coffee
Vanilla
Coconut Meal
Root Crops
Live Fish
Alcoholic Drinks
Fish

The Size of Public Sector continues to grow, despite a major
Comprehensive Reform Program (to reduce the size of Public Sector)
way back in 1989

Expenditure trends over the years confirmed that the Government
national Budget continue to increase

Revenue Trends also confirm that the Government continues to
increase it current revenue based, however the current tax base is
deem narrow and needs to expand. New forms of Taxes would be a way
out but requires a lot of political Will.

There is a need for the government to evenly spread its project
investments over the years to ensure Inflation is controlled and that its
impact on the GDP growth is not too volatile.

Political Instability contributes a lot to our current rate of Expenditure
which impact a lot on National Revenue.

Currently is 12.5%

Works have been done lately to review current
VAT legislations including any possible
amendments

For any business to register for VAT, its Annual
turn-over must be VT 4 Million and above.
(Category of
Businesses)
Total number of
business under each
category
Very Large
21
Large
172
Medium
622
Small
199
Micro
Un Segmented (Non
Compliant)
278
Overall Total No# of
businesses
Compulsory VAT
Registration
2,100
3,392
1,014
Annual Turn-over margin.
Annual Turn Over exceed 1 Billion Vatu
Annual Turn Over exceed 100 Million to 1
Billion Vatu
Annual Turn Over exceed 10 Million to 100
Million Vatu
Annual Turn Over exceed 4 Million to 10
Million Vatu
Annual Turn Over is less than 4 Million Vatu Some of them are new business
Depends very much on the Integrity of Data Some Data Cleansing work must be done.
How many business file a VAT return in 2015?
On average 1,000 business file a return
How often?
 Every month.
 The number will increase only by a hundred for
businesses filing quarterly returns.
What is the proportion of tax returns filed on time?
1,003 returns filed from 1,707 due (59%)
What proportion of tax returns is filed ectronically?
None.
What is the proportion of taxes paid on time?
1,003 returns filed
 58 nil returns
 252 refund returns
 693 returns with VAT to pay.
 Out of the 693 returns to pay, 621 were paid on time. Only 72 returns
were paid late.
What is the value of tax arrears?
 VT3.6 billion (including penalties of VT2.6 billion)
What is the number of tax arrears cases?
 Total of taxpayers with arrears: 605
 Total of cases with prosecution or undergoing investigations for court:
10

We need better Revenue Forecasting tools
such as a Model or framework.

Our Current Tax / Revenue review will likely
to draw resources from within the region
and externally. We will need support .

Despite our current challenges we are
determined the future will be more
rewarding if we can work together