The Solomon Islands Chamber of Commerce and Industry (SICCI) in partnership with the Ministry Finance and Treasury recently (option of putting actual date) hosted a consultation meeting with businesses on the proposed Value Added Tax.

SICCI acknowledges the need to reform the tax system in the Solomon Islands given the fact that it is outdated, complex, narrow base of compliant taxpayers, discourages growth in key sectors of the economy and it does not support local exporters and promote trade.

VAT is a consumption tax, applied to goods and services. These are called taxable supplies. VAT is charged on import or manufacture, and then on each subsequent sale until the final consumer.

If a seller is registered for VAT, they charge VAT. But they can claim credit for the VAT they paid on their inputs. This stops a cascading of tax.

SICCI has consistently highlighted the tax issue with the Government through available platforms including the SIG-Private Sector Advisory Group meetings established by the Memorandum of Understanding (MoU) signed in 2017 and resigned in 2020.

SICCI is aware of the development of Value Added Tax (VAT) bill under the Ministry of Finance and Treasury is currently underway and looks forward to also acknowledges the consultation for SICCI members who are key employers in the private sector in Solomon Islands.

“SICCI has the goal that through our contributions, and that of other stakeholders, our tax system will be fair, modern, and simple enough to follow which enhances taxpayer compliance in the country.

“We encourage the Government to take a broader view of taxation. One that sees the importance of course in raising much-needed revenue, but one that does not stifle businesses and growth in the country,” SICCI said.

According to the presentation from the Ministry of Finance and Treasury, only businesses registered for VAT can charge VAT. All businesses with turnover in excess of SBD $600,000 must register for VAT. Only businesses registered with VAT can charge VAT and claim VAT credit / offset. Small businesses with less than $600,000 turnover will no longer charge tax (VAT is not applicable and GST is removed). However, small businesses will still need to pay VAT on import and purchases from VAT registered suppliers.

A Standard single VAT of 15% is proposed to be charged on most goods and services. VAT rate has been calculated to provide sufficient revenue to replace Import duty (except for motor vehicles and items that would be excisable if domestically produced), Goods and sales tax, Stamp duty and Accommodation levy.

However, existing excise, mining and resource royalties and export duty will remain unchanged.

Customs will collect VAT on imports, and most businesses will charge VAT on the goods and services they sell.

All supplies of goods and services will be subject to VAT unless a specific concession is included in the Act. There will be two types of concessions including Exempt supplies and Zero-rated supplies.

Some industries are exempt for VAT such as Education, Medical services, Church groups, financial services (including life insurance) and local buses and taxis but not hire cars for tourists and tour buses. VAT is also allowed zero-rated on taxable supplies; but input tax credits can still be claimed. VAT exempted on services does not mean that business is exempted from VAT, business does not need exemption, as VAT is ultimately paid by consumer. Exemption approved at minister level is removed. Any VAT exemptions will need to be approved in parliament, as a change to the VAT Act.

The draft VAT bill will be tabled in parliament in April 2023, and if approved, will be rolled out in the next 18 -24 months. There will be wider consultation in the next few weeks and potential small changes.