Vanuatu Government clarifies VT19 billion budget

Vanuatu Minister for Finance Mr, Gaetan Pikioune has thanked the Leader of Opposition for being very proactive on issues of national interest.

“I am delighted that the leader of the opposition is calling for an early justification of the proposed VT19 billion budget for this fiscal year, although detailed explanations will be provided to the Public including the Members of Parliament (MP) during Budget 2016 debate’, Mr Pikioune said in a statement.

The current government has reviewed the 2016 Budget prepared by the last Government and realigned the Government’s plan spending according to its priority policy plans. Such priority plans intend to ensure that all revenue potentials are explore without really raising any current tax rates or introducing new tax regime. ‘I wish to advise the Hon. Leader of Opposition that the expenditure budget has been prepared in line with the 2016 Budget Policy Statement where revenue receives will be allocated to TC Pam recovery activities and support towards the social and productive sector to improve service delivery at same time improve economic growth’, said Mr Pikioune.

For clarification, Budget 2016 is composed of VT16.6 billion in recurrent revenue (revenues that can only be collected by the Government through its various revenue collecting agencies) and VT 2.6 billion in Government bond giving the total of VT19.2 billion, excluding all donor grants and foreign loans drawdown. The Government believes that within its current capacity, the country can collect VT16.6 billion in revenue and raise VT2.6 billion worth of bond to optimally operate its administration during this fiscal year.

‘Let me begin the clarification by discussing the methods of collecting the revenues’, said Minister Pikioune. In 2016, the Government projected to raise VT 16,451.1 million through its existing tax regimes and the fees and charges it currently imposed and collect from its services. Of the entire current tax regime, the various taxes on goods and services will be the main contributor of Government recurrent revenue with forecast revenue of VT 10,309.5 million, followed by taxes on international trade and transactions with VT 2,760.3 million, other revenue with VT 2,928.7 million and taxes on property with VT 452.6 million.

The Value Added Tax (VAT) alone is expected to dominate the collection of tax revenues in 2016, being forecasted to contribute VT 6,200.0 million. The next leading category is import duty, which is projected to raise VT 2,760.3 million - the expected collection is consistent with Vanuatu’s trade liberalization policy after acceding to the World Trade Organization. The other revenues are forecast to generate VT 2,928.7 million in 2016. ‘I wish to inform the Hon. Leader of Opposition that these revenue forecasts are very conservation and are being align with overall strengthening of current administration including on the ground compliances’.

‘I also believe that all Ministries have been instructed to continue to implement new revenue initiatives that were outlined in the Revenue Outcome Matrix. A few other ministries have indicated that they will be able to collect additional revenue in 2016’ said Minister Pikioune. This includes the Ministry of Foreign Affairs, the Citizenship Office particularly with the administration of the Vanuatu Economic Rehabilitation Program (VERP), and also the Ministry of Lands through collection of additional revenues on the increase rates of land lease and land sub-division. Other revenue initiatives such as the Office of the Maritime Regulator and the transfer of the Lottery Act to the Ministry of Finance & Economic Management are potential areas to attract additional revenues to the Government coffer.

The government is fully aware of the new overtime rates imposed by the Public Service Commission (PSC) and is working closely with PSC to ensure appropriate measures are put into place. The government assures the Hon. Leader of Opposition that irrespective of the new overtime rates, the staff of the Department of Customs & Inland Revenue will continue to execute their normal duties as expected. The government regret that past governments fail to realize the importance of political stability in the country to avoid situations of low business confidence resulted in situations where businesses are not performing to expectation due mainly to confluence of factors including; TC Pam and El-Nino. However, the current government has design the right vaccine for these chronic diseases and in the processed to be deployed after Budget 2016 has been appropriated, said Minister Pikioune. These will mean addressing the current bottlenecks and red tapes that currently exists within the Public Service.

The 2016 expenditure budget was carefully designed to reflect priority policy areas such as the TC Pam recovery activities as well as support towards the social and productive sector to improve service delivery. Taking these into account, the current Government believes that it is necessary to allocate the forecasted VT 16,694.4 million in revenue collections into planned expenses where it sees areas of potential gains. Foremost is compensation of employees making up VT 8,948.6 million of the forecasted revenue; followed by spending on goods and services, estimated at VT 3,827.0 million. The third largest category of expenses is Grant; including grants to provinces and municipalities with an estimated budget of VT 1,435.3 million. The last categories of expenses include; interest payments, social benefits and other expenses. Out of these expenses items, the government anticipates to spend approximately VT 2,556.2 million to service domestic debts giving the total of VT 19 billion in public expenses.

The Government recurrent new policy proposal (NPPs) is estimated at VT 1,672.2 million mainly to meet the cost of productive sectors, Government commitments including legal obligations, severance payments and other NPPs. ‘This government believes that it is important to make sure elderly who have reached the retirement age needed to be realized and compensated for their life dedicated in serving the Government’ said Minister Pikioune. In realizing this important commitment the Government has allocated a further VT300 million for severance payment in the budget, although insufficient but from the limited resources this is how best the Government can maximize its revenue allocations.

Meanwhile the Government plans to improve the productive sector to raise its contribution to economic growth in 2016 and onwards. This is reflected through the allocation of funding to the productive ministries including, the Ministry of Commerce, Industry and Tourism, Ministry of Lands and Ministry of Agriculture, Live Stock, Forestry, Fisheries and Bio-security. In addition, the Government is also dedicated to supporting the social sector through the Ministry of Youth and Sports for the Vanuatu 2017 Pacific Mini Games operations, Melanesian Games that will be held this year, 2016 in New Caledonia and National Games in Santo.

The Ministry of Finance & Economic Management wishes to inform the Hon. Leader of Opposition and all Honorable elected MPs, that the detail clarification of how the government will collect its revenue and how it intends to spend will be fully documented in the Fiscal Strategy Report, Volume 1 of Budget Book 2016. At the moment, this document is in its finalization stages of French translation before printing. Once the Budget Books 2016 have been printed, it will all be made available to MPs through the Office of the Speaker of Parliament in accordance with the Standing Orders of Parliament, Part IX (50).

As Minister responsible for public finance, it is my duty to ensure Budget 2016 is presented to Parliament in good times. I write to request support from the Office of the Leader of Opposition during the actual debate of the Appropriation Bill to ensure Budget 2016 is ratified as planned and to allow flexibility in the administration of public services. It was my original hope that this budget should have gone before Parliament in 2015 should the country avoided political crisis that forced the country into the Snap General Election in late January 2016, echoed Minister Pikioune.

Source: Loop Vanuatu