I admit, other than for a few oddballs (myself included), it is hard to get excited about tax law.

Today I’m writing about a tax law. But I am most interested in the curious way the Government is going to rush through a change to it.

Completely out of the blue and without any warning, the Government is going to stop charging Capital Gains Tax, or CGT, for a whole lot of people.

This wasn’t announced in Economy Minister Aiyaz Sayed-Khaiyum’s two-hour-plus Budget speech last month. And he does not explain why it is being done now.

So what is going on?

Let’s begin with law-making, Fiji style.

We all know how it works now. Last month’s controversial Bill 17 showed us how. Members of Parliament turn up for their week-long Parliamentary session on Monday.

On that day, they have no idea what laws they will be asked to debate and pass, because the Government has not told them. Certainly not the Opposition MPs.

And, it seems, not even most of the Government MPs.

And then suddenly, on Monday afternoon or Tuesday morning, the bills will turn up. And then the MPs will be told “this is urgent, we will debate them on Thursday for one hour”.

There’s a debate. Then the Government says “we will vote now”.

And the Government uses its majority to vote in the new law.

So nobody has the chance to read the Bill properly or ask for people’s views, or even consult experts on what it means.

In Fiji we all just accept this as normal. But take it from me – in a truly democratic country, this is not normal Government behaviour.

And so this “new normal” law-making is now starting with the Income Tax (No 2) Amendment Bill 2021 which is before Parliament now. About CGT.

Capital Gains Tax

CGT is a tax on people who sell their property or transfer it to others (a “disposal”). Many different types of property – most commonly land and buildings and shares – but also other things) – are so-called “capital assets”.

Since the CGT law change concerns shares, let’s focus on them.

Very few of us own shares in companies.

Usually those who own shares in Fiji are rich (or nearly-rich). Successful companies which hold onto good assets and earn good profits will increase in value over time.

That means their shareholders – who each hold a piece of those companies – will see their wealth increase.

So if you formed a company in, say, 2010 and bought a building, that company is probably worth much more in 2021.

If you sold those shares in 2021 you would make a large profit – for these purposes, a “capital gain”.

Some capital gains are exempt. This means you don’t pay tax on your capital gains if you sell them.

This applies, for example, for people who own shares in a stock exchange-listed company (Fiji TV, Vision Investments, Paradise Beverages).

However for other companies (and subject to some other exemptions) you must pay CGT when you transfer your shares.

Under the CGT law, the Government will tax 10 per cent of that gain. That has been the law since 2011.

The law requires that, 30 days after you dispose of your shares, you must file your CGT return with the Fiji Revenue and Customs Service.

FRCS will then issue your “assessment” – that is, a demand for the amount of CGT you must pay.

That is a debt you owe to the Government. You must pay it. If you don’t pay it, all kinds of bad things happen.

FRCS can collect your debts or seize your assets.

It can even stop you leaving Fiji.

Suddenly, a change

But suddenly – and without warning – the law creates a new exemption.

If you owned any shares before 2011 and you sell them now, you won’t have to pay CGT. But there’s more.

Curiously, tucked into the Bill, there seems to be a special, very unusual, clause. This clause will forgive some people the CGT they already owe to FRCS. How?

Let’s assume the law change takes effect tomorrow (when the Government plans to vote it in).

It seems that if you owed CGT to the Government today but you haven’t paid it – well, all is forgiven.

Let’s say you sold your shares four weeks ago and filed your CGT return yesterday. Hey presto – no CGT!

Let’s say that you sold your shares two months ago, and you  filed your return. Maybe you got your CGT assessment last week but you haven’t yet written the cheque yet. Even though you owe the CGT to the Government – for you too – no CGT!

Let’s say you transferred yourshares to somebody else three  months ago. Then you “accidentally on purpose” forgot to file your CGT return. Some people might call that “tax evasion”.

But it seems that, for you, too – no CGT!

But what if you sold your shares last month and, like a good, conscientious, tax-paying citizen, you promptly paid your CGT?

Maybe you’ll get a refund?

Well the law is clear on that. No.

Now, some of us think CGT is a good tax and some of us don’t.

Some believe that those who own capital assets should pay tax when they sell them. Some say no, this is bad for business and Government should support business because it makes the whole country richer.

Other people say “it’s not fair to tax people for selling assets  they owned before 2011 when the law changed”. Other people say “they are rich enough, they can pay a little bit more tax”.

We can debate those questions another time. That’s not today’s question.

Questions

But these are my questions:

• Why, suddenly, when it has no money, has the Government suddenly  decided to give away more tax? This law change has not been announced before. We haven’t been told the reason. We haven’t been told it will boost the economy or bring back the “Bainimarama boom”; and
• if the Government has decided to protect people who owned shares before the law changed, what about people who owned other capital assets? Such as land and buildings? They still have to pay CGT when they sell them;
• If someone who sold his shares recently and paid his CGT  he will not get a refund. Yet someone else, who sold her shares on the same day but hasn’t yet paid her CGT, now won’t have to pay it.  Why? And how is that fair?

It is this last question which continues to intrigue me.

Normally, when a tax law is changed, the consequences, as the lawyers might say, “lie where they fall”.

If the law is changed today but you owed tax yesterday – well, very sorry, but you still have to pay the tax.

But this law has a special clause in it that says “if you haven’t paid the tax you owed yesterday, that’s OK — you don’t have to pay it now”.

Tens of thousands of Fiji citizens, through no fault of their own, have no income. Thousands are sliding into poverty. This is a time when the Government should be aggressively collecting tax from those who owe tax and are able to pay it.

So the Government owes us all an explanation.

Why is it making this sudden, previously unannounced law change now? And why is the law carefully written so that some people who are already supposed to pay the tax now won’t have to?

“Transparency and accountability” are the buzzwords of this government. Let’s have some.

•  Richard Naidu is a Suva lawyer. And yes, he does practise tax law and he even knows some. The views expressed in this article are not necessarily those of The Fiji Times.