The Ministry of Finance and Treasury (MoFT) has successfully secured the Cabinet endorsement of the National Payment System Bill and Tax Administration Bill 2019 to be table in Parliament. This was confirmed by the Minister of Finance and Treasury.
A statement from MoFT said the National Payment System Bill 2019, if become law will provide a legal framework to introduce an electronic payment system in Solomon Islands that to be used for transferring, clearing, or settlement of funds or securities.
The statement said implementation would allow a safer and, at the same time, more efficient settlement process reducing systemic risks, avoiding human errors and delays the typical of manual processing, and speeding up the availability of funds for beneficiaries of payments.
In Solomon Islands, there is no payments system in place to facilitate electronic funds transfers between banks or between customers of different banks. Instead, all these payments are made with cheques and cheque clearing is manual.
The MoFT statement continued that Tax Administration Bill 2019 if passed will regulate the administration of the tax laws of Solomon Islands, with the intention of providing a modern administrative basis for the tax system and ensuring that arrangements are consistent across the different taxes administered by the Commissioner.
The two Bill is part of wider fiscal reforms the DCGA Government has prioritise and entrusted on MoFT to progress. In 2019, MoFT has successfully amended the National Income Tax Act, that increase tax-free bracket to $30,000 from $15,000 which has effective early this year and the Goods Tax Act also amended as part of a compliance measures.
Meanwhile Director of ERU, Mr. Rictor Luaboe, explained the review of the country’s tax system is high on the Government’s agenda for fiscal reform since taking leadership. The DCGA Policy Statement have placed importance of reviewing the current tax system.
Mr. Rictor explains the current system is outdated, costly to comply with, collects revenue inefficiently and does not represent a sustainable base for revenue sustainability for the Government.
The oldest tax legislation is around 60 years old, while the most recent tax legislation, the goods tax, is 30 years old. The system is outdated and there has been little change made to the tax law in decades.
A comprehensive tax review would seek to ensure a modern, fair, simple and broad-based tax
system, which would encourage economic growth by supporting local businesses and attracting foreign investment. This in turn would lead to increased tax revenue over time.
In 2017, ERU has been consulted with the key stakeholders on the review of the national tax system. There was overwhelming support across from the stakeholders consulted to improve the tax environment as it is currently seen as a barrier to activity and development.
The Feedback was gathered from the consultation and recommendation was made for the cabinet endorsement to progress the reform.