Fiji’s taxation system is not fit for purpose and is overly complex and unequal in the tax burden it imposes on low to middle income earners, says the Fiji Law Society.

FLS president Wylie Clarke stated this in a submission to the Fiscal Review Committee.

He said the current rates of corporate tax, the tax-free treatment of dividends, the high tax-free threshold and the Social Responsibility Tax imposes a disproportionate tax burden on low, middle and even high-income earners.

“The current regime disproportionally favours the very high-income earners and serves to increase the wealth gap,” Mr Clarke said.

“The three-tiered VAT rates are overly complex and costly to administer and comply with.

“The VAT reverse charge is also overly costly, a drain on cash flow and serves as a disincentive for the obtaining of needed goods and professional services from offshore.

“The rationale for re-imposing it is unclear to the society other than to effectively loan money to government.”

He said the society strongly advocates for an overhaul of the current system of taxation because it is overly complex and expensive to comply with.

“It is in serious need of simplification.”

He said corporate tax rates and the tax-free status of dividends must be reviewed and corrected.

“The special tax treatment for listed companies for corporate tax, capital gains tax and the like must also be reviewed.

“There is no sound policy or fiscal justification for continuing the existing tax regime for listed companies. Indeed, the reality is that these incentives disproportionally favour the wealthiest businesses and people in Fiji.”

Mr Clarke said the imposition of the social responsibility tax over and above normal income tax is an unnecessary one.

“Higher income earners can be captured through a tax scale without the need for the imposition of a different tax.”