Honiara- Manufacturing members of the Solomon Islands Chamber of Commerce and Industry (SICCI) participated in a roundtable discussion on the Value-Added Tax (VAT) system. The event was held at the Honiara Room of the Heritage Park Hotel and was attended by representatives from the Inland Revenue Division (IRD) and the Economic Reform Unit (ERU) within the Ministry of Finance and Treasury (MoFT).

The purpose of the roundtable was to provide SICCI Manufacturing members with further clarification on the VAT system in the Solomon Islands. The event provided an opportunity for members to raise specific concerns and questions related to VAT and receive direct responses from the IRD and ERU. The aim was to facilitate a better understanding of VAT and ensure compliance among the manufacturing sector.

During the discussion, the IRD and ERU informed participants that the VAT Bill would not be able to go through parliament by April 2023 due to certain delays. The standard VAT rate across the board is 15%, and it is a consumption tax, which means that more consumption leads to more tax. VAT is imposed on final consumption and not on businesses.

According to the presentation from the Ministry of Finance and Treasury, the threshold for businesses to register under VAT is $600,000, and the threshold is currently open for review. There are no exemptions under VAT, except for services stated under VAT. Only Parliament can grant more exemptions, by amending the VAT Act. When VAT comes into effect, all exemptions will be abolished. They further informed the participants that if inputs are more than output, businesses can claim a refund under VAT. GST is still imposed until VAT comes into effect.

The overarching purpose of VAT is to impose a broad-based tax on consumption, which is understood to mean final consumption by households. In principle, only private individuals, as distinguished from businesses, engage in the consumption at which VAT is targeted. However, in practice, the VAT system also imposes VAT on entities that are not registered for VAT. These entities pay VAT on purchases but cannot claim an input VAT credit, so the cost price to these entities includes the VAT paid. These entities do not collect VAT as they are not registered for VAT.

"The roundtable was a great success, and we appreciate the efforts of the IRD and ERU in providing clarification on the VAT system," said the Chair of SICCI, Ms Qila Tuhanuku. "We believe that this discussion will contribute to a better understanding of VAT and ensure compliance among our manufacturing sector. We look forward to future collaborations with the IRD and ERU."

SICCI as the private sector representative is a not-for-profit membership organisation with more than 210 businesses from all diverse sector in Solomon Islands. The manufacturing sector is led and represented through the Manufacturing Industry Working Group formed by the members of the chamber. SICCI is working closely with the IRD and MoFT to ensure that businesses are engaged with the tax reform plans of the government to be implemented in the next five years, starting with the now enforced Tax Administration Act. The VAT Bill is one of the many changes currently under consultation with the private sector and other non-government organisations. 

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