Fiji’s Tax Authorities Warn of Elite’s Tax Avoidance Schemes
Suva, Fiji - Governments Globally Struggle with Tax Base Erosion
In a move to curb tax evasion and ensure government revenue, Fiji’s tax authorities have warned that high-income earners are more likely to engage in tax avoidance schemes to minimize their tax liabilities. This warning comes as governments globally struggle with the issue of tax base erosion due to aggressive tax planning and avoidance schemes by multinational corporations and wealthy individuals.
Fiji’s Progressive Tax System
According to Dr. Jone Wesele, an expert on taxation, Fiji has a progressive tax system where the more one earns, the higher the income tax paid on that additional dollar. However, with most taxpayers falling below the threshold, they do not pay income tax and are therefore unlikely to engage in tax avoidance schemes.
“It is common sense that those who fall below the tax threshold will not engage in tax avoidance schemes because they are not paying tax,” Dr. Wesele said.
“However, high-income earners have more incentives to avoid taxes as they stand to gain a significant amount by minimizing their tax liabilities.”
Anti-Avoidance Rules and Penalties
Fiji’s Income Tax Act 2015 has legislated anti-avoidance rules to prevent such schemes, which are considered illegal. The CEO of Fiji Revenue and Customs Service (FRCS) has the power to adjust chargeable income and tax credits to prevent any reduction in tax payable as a result of income splitting or other forms of tax avoidance.
Additionally, section 46 of the Tax Administration Act 2009 provides penalties for making false or misleading statements to tax officers. Penalties range from 75% to 25% of the tax shortfall depending on the number of offenses committed.
Addressing Global Tax Issues
The FRCS has also internalized international best practices in its tax laws to address global tax issues such as Base Erosion and Profit Shifting (BEPS). The BEPS action points include:
- “Thin Capitalization”
- “Transfer Pricing”
- Taxing digital economies while preventing double taxation and double non-taxation
Consequences of Unchecked Tax Avoidance Schemes
Experts warn that if left unchecked, tax avoidance schemes can erode government revenue bases, making it difficult for governments to fund public goods and services.
In conclusion, Fiji’s tax authorities are urging high-income earners to comply with tax laws and avoid engaging in tax avoidance schemes. The warning serves as a reminder of the importance of transparency and accountability in taxation practices.