This past week, FHTA’s inbox has exploded with thousands of questions from around the country and the world. A resort in the Yasawas wants to know whether a booking paid in full back in April, for travel in October, is liable for the new levy.
A Sydney-based wholesaler wants to know whether they need to go back to clients who paid deposits months ago and ask for another 5 per cent. A non-member destination management company is asking essentially the same question everyone else is asking: how does this actually work?
We don’t yet have a complete answer for any of them, and with 10 days left before the Tourism Services Tax takes effect, that gap is starting to feel less like a temporary inconvenience and more like a structural problem.
This is not a policy preference we are attached to for the sake of being difficult. This is industry basics and what the fate of marketing Fiji as a destination might be pinned on.
It is the line on operator profit and loss statements that determines whether a resort can make payroll in the low season, whether a small tour operator can service the loan they took out to buy a second van, whether a family-run guesthouse on the Coral Coast turns a profit this year or simply survives it.
It is also the difference between a destination being treated as too hard to sell and, therefore, ignored until we get our basics right. We must, therefore, raise this until it is resolved, because resolution is the only outcome that protects the people we represent.
Through budget submissions, at the FRCS consultation table, in this column, and in nearly every conversation we have had with officials since the measure was first announced, it might look like unnecessary repetition from the other side of the table.
Or like we cannot let something go. I want to explain, plainly, why we have not let it go and why we are not about to, because the reason matters more than the optics, and the frustrations I have described above are a large part of that reason.
This is no longer a debate confined to FHTA’s own membership. It has spread across the entire distribution chain that sells Fiji to the world, and every one of those enquiries is a business trying to work out, in real time, how to charge a tax that still has no confirmed operational treatment less than one and a half weeks before it becomes law.
A key point that might not have been spelt out clearly enough in previous pieces should genuinely concern anyone reviewing this measure with fresh eyes. A turnover tax does not ask whether a business is profitable before it applies. It simply applies. Take an operator retaining 25 per cent of revenue as profit, a reasonably healthy margin in this industry.
A 5 per cent tax on turnover, on top of the existing 25 per cent corporate income tax, works out to roughly 45 per cent of that business’s actual income going to tax. Now take an operator retaining 15 per cent of revenue as profit, which describes a great many of our smaller and mid-sized members carrying post-pandemic debt, seasonal exposure and rising compliance costs. For that business, the same 5 per cent turnover tax consumes a third of its profit, pushing its total tax burden to 58 per cent of income.
I do not know of a comparable tourism destination anywhere that asks its operators to hand over more than half their profit in tax, and I do not think Fiji intends to become the first. But that is the mechanical result of taxing turnover rather than profit, and it is the reason this measure cannot simply be filed away as a temporary inconvenience. For some of our members, it is the difference between reinvesting in their property next year and not being able to.
I raise this now, so close to implementation, because the calendar has not been kind to this process. The operational guidance our members need to actually charge this tax correctly, on existing bookings, through wholesale and agent chains, without exposing themselves to double taxation, still has not arrived in the form or the detail our industry needs to comply confidently from day one.
We have said this in earlier pieces, and I will not dwell on it again here, except to note that the clock has not stopped moving while these questions sit unresolved, and neither, evidently, has our inbox.
What I do want to spend more time on is something we have perhaps under-explained until now, which is what this measure actually threatens beyond the immediate 5 per cent on an invoice.
Fiji’s tourism product is not sold the way a domestic retail good is sold. It is packaged, priced and marketed by wholesalers and agents around the world, often a full year or more ahead of a guest actually stepping off a plane. Those wholesalers invest real money into brochures, digital campaigns and long lead-time marketing programs, all built on the understanding that a price agreed with a Fijian resort today will hold for the period it was contracted for.
When a new tax can be introduced and applied after contracts are already signed, that certainty disappears, and it does not just disappear for the resort absorbing the cost. It disappears for every wholesaler deciding whether Fiji is a destination worth the marketing investment next season, when competing destinations can offer the pricing certainty Fiji currently cannot.
That competitiveness question is not abstract either. Layer this tax on top of the existing 12.5 per cent VAT and affected tourism services carry a combined tax burden of 17.5 per cent, before a traveller has even reached the departure gate and paid the existing $200 departure tax.
We are asking the market to absorb that at the exact moment we are competing for the same travellers against destinations like Bali, Thailand and Vietnam, all of which combine lower wage scales, far greater access to cheap local produce, and considerably higher productivity with pricing that simply does not carry this kind of layered tax load.
Government has its own ambition of adding 4000 new hotel rooms to this market in the coming years. I struggle to reconcile that ambition with a tax structure that makes the economics of running the rooms we already have measurably harder.
None of this is an argument against Fiji Airways, because I know how easily this gets flattened into a false binary. The airline’s importance to this country’s connectivity, trade, diaspora travel and national brand has never been in dispute, ever.
Government has rightly recognised that importance elsewhere in this budget, extending the loss carry-forward period for the airline from eight to 15 years, extending the moratorium on revised outdoor fees through to July 2027 for an estimated $10 million in annual relief, and recently confirming an additional $200m guarantee.
Those are substantial, appropriate measures for an asset Government itself has called strategically important. Which is exactly why concentrating a turnover tax onto one sector, when the airline serves the whole country through trade, freight, medical travel and education, sits so awkwardly next to those other measures.
If Fiji Airways truly is a national strategic asset, and I believe it is, then the mechanism supporting it should be a national one, not one drawn narrowly from the industry that happens to be its largest single customer.
So yes, Government Buildings has probably heard FHTA make some version of this argument more times than anyone over there would like. I don’t say that with any satisfaction. I would genuinely prefer to be writing about something else this month, and I suspect our members would prefer to be running their businesses without needing us to.
But every version of this argument we have made has come with the same short list of asks attached, and that list has not changed because the underlying problem has not changed.
Existing bookings, already contracted, deposited and paid for, need to be excluded outright.
The tax cannot apply retrospectively to arrangements entered into before it existed.
There needs to be clear, workable administrative treatment so the tax does not cascade and compound as a booking moves through an agent and wholesaler chain.
It needs a genuine, legislated sunset clause of no more than 12 months, not an informal expectation that it will eventually lapse.
And the revenue raised needs to be ring-fenced, independently audited and publicly reported, so that everyone paying into it, our members most of all, can see exactly where it goes and confirm it did what it was introduced to do.
We have also asked, and I will repeat this once more because it remains, in my view, the most constructive idea on the table, that Government give serious consideration to converting these forced contributions into equity through a special purpose vehicle, rather than treating them as a straightforward tax with nothing returned to the businesses funding it.
If our members are effectively being asked to invest in Fiji Airways’ recovery, they should be allowed to hold something for that investment, not simply absorb a cost and receive nothing in return beyond the continued existence of a service they already needed in the first place.
I would ask anyone reading this in an office in Suva to sit with the arithmetic I opened with for a moment, and with the resort in the Yasawas, the wholesaler in Sydney, and the destination management company that isn’t even one of ours, all still waiting on an answer we cannot yet give them.
Fifty eight per cent of income, for a business already carrying debt and thin margins, is not a rounding error we can quietly absorb and move on from.
It is the kind of number that decides whether a small operator reinvests, treads water or eventually closes. We will keep raising this, in whatever forum will have us, for exactly as long as it takes to get workable answers, because for our members this was never a talking point. It has always been the bottom line.
