VAT is Coming: Businesses Told to Get Ready

By Georgina Maka’a

After three decades of discussion, Solomon Islands has formally begun public consultations on a long-awaited tax reform, including the introduction of a broad-based Value Added Tax (VAT) that the Government says will reshape how the country raises revenue.

Finance Minister Gordon Darcy Lilo officially opened the first consultation on the Draft Formal Tax Policy Work Programme 2026–2028 in Honiara today.

The consultations, led by the Economic Development Division and Inland Revenue Division, mark the beginning of a process the Minister described as critical to strengthening the economy and building a sustainable revenue base.

“This Government has a clear focus on strengthening our economy and improving the ability of the Government to deliver for the people of Solomon Islands,” Lilo said.

“A strong and sustainable revenue base is an important part of the whole economic system,” he added.

Lilo acknowledged that VAT, a broad-based tax on the consumption of goods and services, has been under discussion in Solomon Islands for about 30 years.

He noted that the current Commissioner of Inland Revenue and his deputy were junior officers when discussions on VAT first began, while he is now serving his third term as Finance Minister.

“You can see that it can even take time,” he said.

However, Lilo made clear that the consultations were not about reconsidering the decision to introduce VAT, but about explaining the reform and preparing businesses and taxpayers for its implementation.

“Today is not about reopening that decision or asking stakeholders whether it should be introduced,” he said.

“Today is about understanding what is in the VAT, what it means, and what businesses and taxpayers need to do to prepare.”

Lilo said the introduction of VAT would create new obligations for businesses, including registration, invoicing, record-keeping, charging and reporting VAT, and claiming tax credits on eligible business purchases.

“This preparation cannot be left until the last minute,” he warned.

He said the Inland Revenue Division would be responsible for administering the reform, including training staff, developing systems and procedures, issuing guidance and registering taxpayers.

The Economic Development Division, meanwhile, would assess the wider economic impact of the reform.

“This is not simply an Inland Revenue reform, but a whole-of-government reform,” Lilo said.

He said successful implementation would require cooperation between Government agencies, businesses, professional advisers and the wider community.

A major part of the reform will be an education and public information campaign to ensure businesses understand their responsibilities before VAT takes effect.

“We do not want businesses to reach implementation and discover that they do not understand their obligations,” Lilo said.

“We want businesses to have time to prepare, time to make changes to their accounting and invoicing systems, and time to train their staff.”

Lilo encouraged greater participation from the private sector, which he said plays an important role in generating taxable economic activity.

He stressed that the Government’s objective was not simply to introduce another tax, but to establish a stronger, fairer and more sustainable tax system.

The reform is intended to increase domestic revenue, improve tax compliance and provide the Government with more resources to fund essential services and national development.

“The task now is preparation, education and implementation,” Lilo said.

“We all have a role to play in making sure that the reforms are understood and can be implemented effectively.”