Scrap tax holidays: Chaudhry

[posted 27 December 2005, 1300]

Opposition Leader Mahendra Chaudhry has welcomed a call by the Asian Development Bank to scrap tax holidays and other incentives to large businesses because they tend to be counter productive.

In its latest report of an assessment of the private sector in Fiji, the Bank says 20-year tax holidays and duty concessions granted to large investors, particularly in the manufacturing and tourism industries, have been abused and have not attracted investment.

The ADB has warned that a number of these entrepreneurs tend to use up the tax holidays and leave once they expire.

Mr. Chaudhry said the Fiji Labour Party had always questioned the real value of tax holidays and duty concessions.

“One, they discriminate against the smaller companies who do not qualify for similar concessions. Secondly, these overseas entrepreneurs come in, make huge profits much of which is repatriated and give very little back to the country. They pay no taxes, make use of the infrastructure provided by tax payers’ funds and even demand preferential treatment in the provision of utilities and other services,” Mr. Chaudhry said.

Our experience shows that foreign direct investment remains at a low level despite significant concessions granted to the tourism industry and the manufacturing sector. The loss of revenue through such waivers run into billions of dollars over a time frame of 10-15 years.

A sore point with local investors, both big and medium sized, is that concessions and tax holidays are not always granted on a set criteria. Some area able to influence the decision makers, mostly through questionable means, to obtain better deals for themselves, said Mr. Chaudhry.

The ADB report is also critical of the fact that procedures and discretion governing the implementation of tax holidays and concessions in Fiji provide conditions that allow corruption and bribery to prosper.

There is therefore an urgent need to review these procedures and the relevant laws to remove the discretionary powers of government officials and to vest them in appropriately constituted tribunals.