Solomon Islands Opposition Leader Matthew Wale has pressed officials from the Ministry of Finance and Treasury to provide stronger economic justification for the proposed Value Added Tax (VAT) legislation.
During the Bills and Legislation Committee (BLC) hearing on the VAT Bill 2025, Mr Wale raised a series of questions aimed at clarifying the policy assumptions and economic modelling behind the proposed reform.
The Opposition Leader questioned whether the Ministry had undertaken detailed economic modelling to assess how the proposed VAT framework would interact with existing tax legislation, particularly laws that may be repealed or amended to accommodate the new tax system.
Wale also sought clarification on whether modelling had been conducted to estimate the likely impact of the VAT regime on government revenue as well as the broader economy.
MoFT officials informed the Committee that current modelling suggests the proposed VAT system could result in a significant increase in government revenue.
However, officials acknowledged that the projections are heavily dependent on improved tax compliance, which remains a significant challenge within the current system.
The Opposition Leader also questioned how the proposed VAT framework would affect personal taxation.
He questioned whether personal income tax, including Pay-As-You-Earn (PAYE), would be reduced, increased, or remain unchanged once the VAT system is introduced.
In response, the Commissioner explained that reforms to personal income tax are being considered separately and will likely be addressed in a later phase of the government’s tax reform program.
Officials indicated that such reforms might be considered around 2028, when the VAT system is expected to be fully implemented.
Mr Wale emphasized that the Committee’s responsibility is not limited to assessing potential increases in government revenue.
He said the Committee must also understand the broader economic consequences of the proposed tax reform.
“The Committee’s interest extends beyond Inland Revenue collections. We need to understand how this legislation will affect the wider economy including imports, exports, domestic production, services, and overall economic activity,” Wale said.
The Opposition Leader said a comprehensive economic assessment would help ensure that Parliament fully understands the implications of the proposed VAT reform before the legislation proceeds further.
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