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Vanuatu needs to hike the rate of value added tax instead of raising income taxes, or else the country could face more difficulty in finding skilled workers.
In a radio interview this week, Martin Hilaire of the Chamber of Commerce of Vanuatu, called on the national government to drop the proposal to raise income taxes, and, instead, hike the rate of value added tax.
Currently the rate of Value Added Tax in Vanuatu is set at 12.5 percent, and Martin Hilaire claimed that it should be raised by 2.5 percent to 15 percent.
It was explained that currently only 26 000 people in Vanuatu are registered for the Vanuatu Pension Plan, indicating that less than 10 percent of the population is included in the tax net.
If income taxes were raised, the burden of the rise would fall squarely on the small proportion of people who are formally receiving paycheques.
As the country already faces difficulty drawing in skilled workers, a rise to income tax would only further hamper the labour force.
Martin Hilaire acknowledged that neither the income tax proposal nor the value added tax proposal would be popular, but suggested that it was a better option, even compared to other floated alternatives such as a hike to land rents, business fees, or work permit fees.
