BY NED GAGAHE
Minister of Finance and Treasury Harry Kuma told parliament on Monday that the government is making significant progress on tax reforms as part of its broader efforts to modernize the tax system and stimulate economic growth in Solomon Islands.
Speaking during the motion to thank the Governor-General for the Speech from the Throne, Minister Kuma said the reforms aim to improve the business environment through a fairer, simpler and more efficient tax system that ensures all liable taxpayers pay the correct amount.
“The tax reform agenda is a substantial and resource-intensive undertaking,” Kuma said. “That is why the government has adopted a phased approach to its implementation.”
Phase one of the tax reform includes the development of the Tax Administration Act and the Value Added Tax (VAT) Bill.
The Tax Administration Act, passed by Parliament in 2022 and enacted on January 1, 2023, provides the legal framework for the consistent administration of tax laws in the Solomon Islands.
“The Act modernizes administrative arrangements and harmonizes the rules across all tax laws administered by the Commissioner of Inland Revenue,” Kuma explained. “It also amends several existing laws—including the Goods Tax Act, Income Tax Act, Sales Tax Act and Stamp Duties Act—to ensure their administration falls under the new Tax Administration Act.”
The second major component of phase one is the introduction of a Value Added Tax (VAT) system.
Minister Kuma said the VAT Bill 2025 has completed final vetting by the Attorney General’s Chambers and is expected to be introduced in Parliament by mid-2025.
“The VAT is a consumption tax applied to most goods and services, collected at each stage of the supply chain, with businesses able to deduct VAT paid on their inputs,” he explained. “Ultimately, it is a tax on final household consumption.”
He added that a Cabinet paper seeking approval to table the VAT Bill has been prepared.
“I urge all Members of Parliament to support this important legislation when it comes before this Honorable House. It will transform our tax system, enhance business growth and strengthen government revenue.”
Minister Kuma also announced that initial work has begun on phase two of the tax reform agenda, which focuses on a comprehensive rewrite of the Income Tax Act.
He said Cabinet approved key policy issues in 2024 that could be included in the rewrite and the Economic Reform Unit, in collaboration with ADB advisors, is now developing a detailed policy paper to support this effort.
“These reforms are crucial for building a tax system that is not only modern and efficient but also equitable and capable of supporting long-term national development,” Kuma said.
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