I admit that tax law is hard to get excited about, barring a few weird things (including me).
Today I am writing about tax law. But what interests me most is the strange way the government is rushing to make changes.
All of a sudden, without warning, the government will stop collecting capital gains taxes (CGT) on many people.
This was not announced in a more than two-hour budget speech by Economy Minister Ayaz Saeed Kaiyum last month. And he doesn’t explain why it’s happening now.
So what’s up?
Let’s start with the Fijian style legislation.
We all know how it works now. Last month’s controversial Bill 17 showed us how. The parliamentarians will appear on Monday for their week-long parliamentary session.
They don’t know the law that they have to discuss and pass because the government didn’t tell them that day. Certainly not an opposition member.
And it doesn’t even seem like most of the government lawmakers.
And suddenly, on Monday afternoon or Tuesday morning, you see your bill. And the MP says: “This is urgent. We’ll be discussing for an hour on Thursday. “
There is a debate. Then the government says: “We will vote now.”
With this majority, the government then votes in favor of the new law.
As a result, no one has the opportunity to properly read the bill, seek public opinion, or consult an expert on its meaning.
In Fiji, we all accept this normally. But take it for me – in a truly democratic country this is not normal government action.
Therefore, this “new ordinary” legislation begins with the Income Tax Act (No. 2) currently being submitted to Congress. About CGT.
Capital gains tax
CGT is a tax on persons who sell their property or transfer it to another person (“alienation”). Not only are there many different types of assets (mostly land, buildings, stocks), but also others are so-called “capital assets”.
The changes to the CGT law are related to stocks, so let’s focus on them.
Few people have a stake in the company.
Usually the person who owns a stake in Fiji is rich (or almost rich). Successful companies that hold good assets and make good profits will increase in value over time.
That is, their shareholders, who each own a portion of these companies, will grow their wealth.
For example, if you started a business in 2010 and bought a building, that business is likely to be far more valuable in 2021.
If you sell these stocks in 2021, you will make a big profit. For these purposes “capital gains” are accrued.
Some capital gains are tax-free. That means you don’t have to pay taxes on the sale of your investment income.
This applies, for example, to people who own shares in listed companies (Fiji TV, Vision Investments, Paradise Beverages).
However, other companies (and some other tax exemptions) require you to pay the CGT when you transfer the shares.
Under the CGT Act, the government taxes 10 percent of its profits. Since 2011 the law.
The law requires you to file a CGT declaration with HM Revenue and Customs 30 days after you sell your shares.
The FRCS will then issue your “assessment,” a request for the amount of CGT you have to pay.
It’s the debt you owe the government. You have to pay for it. If you don’t pay for it, all kinds of bad things will happen.
FRCS can collect your debts or confiscate your property.
It can even prevent you from leaving Fiji.
But suddenly and without warning, the law creates a new exception.
If you owned stocks prior to 2011 and are currently selling them, you do not have to pay CGT. But that’s not all.
Strangely enough, there seems to be a special, very unusual clause hidden in the bill. This clause allows some individuals to admit the CGT already owed to the FRCS. As?
Let’s say the law change goes into effect tomorrow (when the government wants to vote).
Well, if you rent a CGT to the government today but haven’t paid for it, it all seems to be taken.
For example, let’s say you sold your stock four weeks ago and filed a CGT return yesterday. Hey Presto-No CGT!
For example, let’s say you sold your stock and filed a return two months ago. I may have received a CGT rating last week but haven’t written a check yet. Even if you rent a CGT to the government, you don’t have a CGT!
For example, let’s say you transferred your shares to someone else three months ago. Next, I forgot to “accidentally and intentionally” file the CGT return. Some may call it “tax evasion”.
But there doesn’t seem to be a CGT for you either.
But what if you sold your stock last month and paid the CGT right away, like a conscientious taxpayer?
Maybe you can get a refund?
Well the law is clear. No.
Some of us think CGT is a good tax while others don’t.
Some with capital assets think that they should pay tax on sales. No, some say it’s bad for business. Governments enrich the country as a whole and must support their businesses.
Others say it is unfair to tax people who sold their property before 2011, when the law was changed. Others say, “You are wealthy enough and can pay a little more taxes.”
These questions can be discussed at another time. That is not today’s question.
But these are my questions:
- Why did the government suddenly decide to pay more taxes when there was no money? This change in the law has not yet been announced. The reason is unknown. It is not said that it will stimulate the economy or revive the “bainimarama boom”
- What about those who own other investments if the government decides to protect those who own the stocks before the law is changed? Land or building? You still have to pay the CGT when selling.
- Those who recently sold their shares and paid CGT will not be refunded. However, another person who sold their shares on the same day but has not yet paid for their CGT does not have to pay it now. Why? And how fair is that?
It is this last question that intrigues me.
Usually, when tax law changes, as lawyers say, the result is “where they fall”.
If the law changed today but you had to pay taxes yesterday – sorry, you still have to pay taxes.
However, the law contains a special clause that says, “You don’t have to pay the taxes that you had to pay yesterday. You don’t have to pay now. “
Tens of thousands of Fiji citizens have no income, not through negligence. Thousands are in poverty. This is the time when the government should actively collect taxes from those who can borrow and pay them.
Hence, the government owes us all the explanations.
Why are you making this sudden, so far unannounced change in the law now? And why is the law carefully written so that some people who already pay taxes don’t have to pay now?
“Transparency and accountability” is the government’s buzzword. Let’s eat something.
- Richard Naidu is a Suva lawyer. And yes, he practices tax law and knows his way around. The views expressed in this article do not necessarily correspond to those of the Fiji Times.