WHEN we first heard about the VAT Monitoring System (VMS), there was concern for how it would be applied. The idea of modernising tax collection and improving transparency sounded like the right move for a growing economy. But as with many things that work well in theory, the reality has proved far more complicated when applied to an industry as diverse and multi-layered as tourism.
Of course, we understand and support the intention.
The Fiji Revenue and Customs Service (FRCS) designed (or adopted) the VMS to ensure VAT is properly recorded and reported in real time.
The much-applauded success of applying the system to supermarkets pumped up the tax collector’s zeal to roll it out across the business spectrum quickly.
Businesses with annual turnovers of $50,000 or more are required to use certified Point of Sale systems that link directly to FRCS.
Every transaction is meant to be captured, coded and sent to the tax system automatically.
Customers are now being encouraged to check their receipts online to ensure the VAT they paid has indeed been advised to FRCS.
In retail, where transactions are simple and straightforward, this model can work beautifully.
But tourism is not retail, and the products and services offered are wide-ranging.
In our world, a single guest’s stay can span multiple points of sale through dining, bars, spas, boutiques, dive shops, activities and transfers; all of which are supposed to feed seamlessly into one master guest folio.
Smaller operators in remote or island locations still use paper billing that gets tallied up on the desktop computer at check-out.
Additionally, there are often 3rd party transactions where goods and services from other businesses can be charged back to the room with agreed-upon commissions or administrative fees.
Except, of course, that “seamless” bit will be interrupted at each transactional point to include a VAT component that must then trigger the VMS message to FRCS.
Most hotels and resorts use specialised software to manage bookings, billing and operations.
Many of these systems are not currently compatible with the VMS, nor are they likely to be anytime soon without major investment and custom development.
That means, in practical terms, operators are being asked to replace or significantly upgrade the very systems that have allowed them to manage complex international bookings for years.
Who pays for this?
Not FRCS or the government. The cost is borne by the business adding to concerns on operational disruptions, the retraining of staff and the ever-present risk that a technical glitch will halt service or cause billing chaos.
Panel discussions with senior management teams from FRCS, tourism stakeholders and accounting firms were held last week and earlier this week to explore ways to address the inherent challenges.
Tourism is Fiji’s largest foreign exchange earner and one of the most employment-intensive sectors in our economy.
Its success is directly tied to how well we balance competitiveness with compliance.
As businesses, we recognise the importance of paying our fair share of taxes and contributing to national development.
But we also face real challenges as most businesses in Fiji do: multiple levels of levies, frequent policy shifts, complex compliance systems and regulatory agencies that far too often redefine their application or compliance rules in thinly veiled efforts to increase their own revenue streams.
Only the private sector understands these challenges, when added to cash flow pressures that affect our ability to reinvest, grow and create jobs.
This complex environment is further complicated by the fact that we have a larger number of small and medium operators than we do larger and well-recognised operators.
Eighty per cent of tourism businesses are locally owned and/or fall into the SME category.
But still we hear the daily mantra of ‘one-stop-shop’ or ‘one-size-fits-all’ that makes sense only to those who keep saying it.
We used the panel discussion forum as an opportunity to move beyond seeing taxation as a burden and instead explore how we could work together.
If we can simplify compliance, provide predictability and make incentives more widely accessible, we will not only strengthen government revenue but also unlock greater investment, productivity and sustainability in tourism.
Tourism’s transactional structure is inherently intricate. Hotels operate with different business and financial models, cruise companies do not just ferry passengers from one point to another, tour operators do not just transport guests, and activity providers include a range of dive, yacht charters and community-led village visits, trekking or ecotourism ventures.
Fiji’s branding on the global stage is all about our diversity and ability to offer a wide range of choice, price points and experience levels – there is nothing ‘one-size-fits-all’ about us.
Countries with large tourism sectors know this.
The Maldives, Mauritius, Portugal, and even Italy have learned that digital VAT systems must adapt to the realities of their industries.
They have phased implementations, offered sector-specific configurations, and provided generous transition periods to smaller operators.
They also worked closely with their hotel associations and software vendors before rolling out the rules.
We hope that there will be scope for similar adjustment here.
Then there’s the issue of connectivity and geography. Not every resort sits on the mainland with stable internet access or quick access to a technician when systems break down.
Many of our most iconic properties are in the islands, where support can take days to reach and service interruptions have immediate guest impacts.
Expecting real-time data uploads in those conditions is at best, unrealistic, and we have it on good authority that even the in-play hardware for POS do not always work as expected. Fiji is not alone in facing this tension between digital tax reform and the practicalities of hospitality. Around the world, the same conversation is playing out: how to modernise without paralysing, and countries that have succeeded took time to understand the nuances of tourism and built systems that worked with the industry, not against it.
In Brazil, for example, electronic invoicing was introduced gradually, with sector-specific adaptations and extensive collaboration with tourism operators. Portugal’s system allows monthly reporting rather than real-time uploads, acknowledging that smaller hotels and restaurants need breathing room.
The Maldives is working directly with resorts and guesthouses to design its e-invoicing approach around the realities of island operations.
These models are flexible, pragmatic and rooted in partnership.
The biggest bottleneck for tourism operators is how the current VAT rules complicate matters; an issue we have consistently raised for many years with the Ministry of Finance and FRCS – that the VAT Act does not consider how tourism operates, and why the “time of supply” rule is at odds with the industry’s requirement for requesting a deposit to “hold” the room or service.
This distinction for tourism businesses should be included in the amended VAT Act (which is still under review), to enable the payment of VAT only on the delivery of the service.
Effectively, meaning that VAT is applied to the final bill at check-out and does not require adding it to every transaction being carried out during the guest’s stay – that then requires the VMS connection at every one of those points to be sending the VAT data to FRCS as part of trillions of transactions that take place with a million guests using only hotel services annually. (We did the math – trillions!).
We would probably cause the FRCS system to crash! So, we need more practical solutions.
In the meantime, many operators are doing their best to comply, often at significant cost and frustration. If the VMS becomes too cumbersome or costly, it risks pushing smaller businesses toward informality, precisely the outcome the system was meant to prevent.
Our shared goal should be a tax framework that is fair, transparent and supportive of long-term growth—one that recognises tourism’s unique vulnerabilities while enabling it to remain globally competitive.
The reality we experience daily is that tourism businesses are constantly squeezed into generic regulatory frameworks designed for other sectors.
These ‘one-size-fits-all’ models ignore the operational realities we face daily—and they’ve been failing us for decades.
Designing smarter, fit-for-purpose regulations shouldn’t be this hard—especially when they’re key to unlocking broader compliance and long-term economic growth.
n FANTASIA LOCKINGTON is the chief executive officer of the Fiji Hotel and Tourism Association. The views expressed are not necessarily those of The Fiji Times. To share a comment or thoughts on the article, please send an email to info@fhta.com.fj
These ‘one-size-fits-all’ models ignore the operational realities we face daily—and they’ve been failing us for decades, writes the author. Picture: FILE
