Committee calls for new tax on foreign company dividends

June 17, 2024 6:17 am

The Fiscal Review Committee believes that a simple five percent tax on dividends and distributions from foreign companies registered in Fiji remains necessary, both as a means of achieving equity between taxpayers and to raise revenue with an estimation of $30 million.

The Committee has made this suggestion to the government as part of its submission on how the government can raise its revenue for the coming fiscal year.

Committee Chair Richard Naidu says they believe that company owners should be seen to be paying their “fair share” of tax on their incomes.

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He says further taxes involving corporate entities are always challenged on the basis that they discourage investment or that this is ‘not the right time’ to implement them.

Naidu adds that the Committee is of the view that it is important to emphasize that taxes on dividends and distributions largely impact individuals, most of whom are in a better position to make further contributions to public finance.

It says currently, the effective tax rate for foreign companies is 25 percent corporate tax, which is less than the personal income tax paid by individuals who are in a higher income tax bracket (from 33 percent to 39 percent) and foreign shareholders or head offices, who, if they do not pay this tax in Fiji, will most likely pay it in their home country anyway, possibly at a higher rate.

The Committee believes it makes little sense, in those situations, for Fiji not to tax this income only so another country can collect tax on it.

Naidu adds that many companies already benefit from a wide range of tax incentives, which already reduce the tax that they pay, and that their shareholders directly benefit from these corporate tax reductions.

He says the committee does not think it is unreasonable, overall, to ask them to contribute more.