Monday, 30 July 2007 10:44 AM

Economist Critical of Non Cash Benefit Tax

The proposed introduction of a non cash benefit tax has received a cold reception by an economist from within government.

The economist, who wished to remain anonymous, stated that the non cash benefit would worsen the plight of public servants particularly with regards to the non cash benefits that are to be taxed. The economist stated that it is not so much the taxation system that he is worried about, it is more the way in which the non cash benefits are to be calculated.

"What I am most worried about is the fact that non cash benefits such as free or subsidized housing, currently enjoyed by public servants, will be taxed at market rate."

"We all know that the current market rate for housing in Honiara is artificially inflated, a decent house would go for at least SBD $6,000 per month and if we were to factor in housing at such a market price then public servants would get peanuts as take home pay."

The economist said that, put simply, if a public servant received cash income of SBD$ 40,000, with subsidized accommodation worth SBD$ 40,000 (market rate), the public servant would be taxed as if he took home SBD$ 80,000 cash. Prior to the proposed change, the public servant would have been taxed only SBD$ 40,000.

The economist went on to say that it is important for the Inland Revenue Department to look at the unrealistic nature of the proposed taxation system, adding that a housing schedule is far more appropriate.

"The housing schedule just needs to be revised, just re-look at the current rates and peg a rate that reflects the reality of the average Solomon Islander, if not then public servants will just have to move into leaf huts, cut fire wood and hunt wild animals for food."

The economist said that the Central Bank of Solomon Islands should carry out an independent study into the proposed taxation system.

"The CSBI is in the best position to review and make recommendations to the IRD with regards to the proposed taxation system as they have local economists who understand the socio-economic landscape of Solomon Islands," said the economist.

"The consultant hired to do this new taxation system may not fully understand 'local realities' and besides, he will soon return to his country with his fat cheque while we will be left to struggle."

It is understood that the review of submissions by the IRD will take approximately two months with the final policy to be made available on 1 November 2007. It is expected that the final changes will take effect from 1 January 2008.