National Expenditures Needs Tightening Before Income Tax

THE GOVERNMENT MUST tighten up more of public sector expenditures before we can begin to think of introducing Income Taxing in Vanuatu.

As the consultation process continues on this bold government initiative that has got a lot of heads turning we think it is our duty to put something forth on what we think are some necessary steps to take before this ideas becomes a part of Vanuatu’s legal framework.

First of all, if the income tax is going to become a reality then the government, especially the public service sector, needs to effectively manage its collections and spending’s otherwise corruption, or lack of proper management, will reduce the peoples trust in the system.

According to the estimates provided by the Revenue Review Team who are doing the consultation, if the income tax was introduced a huge surplus of revenue will be added into the national treasury.

This will, of course, add surplus to the national budget. But how well will the surplus be managed? That is the challenge that needs to be solved. Because, if we have two to three billion more extra cash then there needs to be a transparent and better management system in place so that people can trust and know that their monies are spend the promised way.

It is of deep concern that tax money, because it is in the billions, could be siphoned away in small amounts into someone’s pocket, or towards unnecessary spending’s.

The administration of the tax system should be fully equipped to fight corruption because such systems are vulnerable. For instance, just this month in Sierra Leone, West Africa, an assessment was made on their tax system by the Budget Advocacy Network (BAN) “with a view to highlight key areas of concerns, reform and opportunities to light the darkened shadows that clouded tax regime in Sierra Leone.”

The BAN is a united front of several NGO’s including Transparency International Sierra Leone (TISL) and its purpose is to ensure “a greater inclusiveness in the budget process, increase access to information and improved responsiveness geared towards achieving gender sensitive and poor budget and programs”.

And in light of this ‘darkened shadows’, this is what their Commissioner of the Anti-Corruption Commission said; “The absence of a fair and equitable tax system breeds corruption…tax management is an attractive sector for corruption to take place as the opportunities and incentives to engage in illicit activities are abundant”.

Moreover, in 2014 the International Monetary Fund (IMF) collaborated with other organizations to address tax administration through an initiative called the Tax Administration Diagnostic Assessment Tool (TADAT) because tax collection “is a central function of government, and weak tax administration can compromise development, growth, and trust in government. Like all government agencies, tax administration face strong public demands for efficient service delivery, operational accountability, and transparency”.

Convincingly, if the tax income is implemented then the administration of those taxes should be corruption-proof.

Furthermore, there are several things that are on the list that needs to be tightened, and one of them is the effectiveness of internal control for non-salary expenditure of which the Vanuatu Public Financial Management Performance (VPFMP) Reports of 2009 and 2013 simultaneously rated a ‘C+’.

In 2014 an economics expert from the University of the South Pacific estimated that approximately over 50 million of unbudgeted vatu are spend on fuel, maintenance, and the purchase of G-vehicles annually.

In that same year, about three months after the 50 million vatu estimation by the economics expert, the Ministry of Finance recorded an increase of expenditure “due to the intrusion of unbudgeted items during the beginning of this year” – Vehicle-replacement cost VT 21.7 million (or 185 per cent) more than what was budgeted for at VT 11.7million, according to the 2014 Half Year Report.

CLICK HERE to visit the Vanuatu Ministry of Finance website.

Strategically, was the unbudgeted VT 10 million spend on the vehicles constructive? Or should that money been used to pay hundreds of students school fees?

The government needs to show more commitment if it wants to tax working citizens by effectively controlling its expenditures, especially those that are not budgeted for. This also means that it is important to avoid political gratuity payments, which according to a Transparency Vanuatu report in 2015, increased by a staggering 18% since 2002.

Furthermore, the VPFMP Report identified that “increased payroll costs and unbudgeted expenditure have raised expenditure levels. In 2009 and 2010, actual revenues were also significantly less than anticipated due to a combination of ambitious forecasts, changes in trade agreements and weak enforcement”.

But it must also be noted that those were reports that reflected the works of previous government, and must not reflect the current government. However, according to national financial information gathered for the 2016 half year report several services have already exceeded their budget limits by a high thousand percent.

The big question to ask ourselves is; if we are trying to raise revenue to upgrade public services and to pay off loans then why are we spending more than what we budgeted?

According to information from the Ministry of Finance the government of Vanuatu has actually spent over VT190 million vatu of unbudgeted funds in the first half of this year on additional vehicles, vehicle hire, acting allowances, court costs, official entertainments and several more.

To conclude, there are mechanisms that needs to be tightened up and unnecessary spending must be stopped because these are the monies that should be used to increase access to areas like the education, communications, health and other services.

It is also important to be mindful of corruption in this sector. In a Working Paper (Tax System: A Channel for Corruption – Or a Way to Fight It?) published by Transparency International in 2015 several main entry points for corruption in taxation were pointed out;

Reporting taxes: This can happen with or without the involvement of tax collectors and through the use of incentives and resources to exert influence (legal and illegal) to allow for inaccurate reporting (e.g. of company turnover and/or expenditures and/or individual earnings).

Collusion: Tax officials take advantage of their authority to issue tax exemptions or levy lower tax rates for individuals or companies, creating a context of policy capture.

Patronage: Ties of community or kinship may favour or penalise certain constituencies, such as by lifting certain exemptions, imposing additional levies, or unevenly enforcing tax compliance.

International tax fraud and evasion schemes: Opaque global financial systems exacerbate the problem through legal and illegal channels and often use tax havens as part of the process. Weak legislation, legal loopholes and the breaking of laws often permit companies not to pay taxes where the profits are made, and instead shift these monies to other jurisdictions with lower tax rates. As the World Bank President recently stated, such company actions are a form of corruption.

All of these issues can be classified, either directly or indirectly, as forms of tax evasion.

Overall, Transparency Vanuatu recommends that existing policies need to be tightened to protect national revenue and enforce better management of public assets because they cost a lot of money. And if we are to pay taxes we would want to know that our monies will be put into raising the quality of life in Vanuatu and not to pay off unnecessary subjects, and for this to happen the government has the important task of convincing the people to trust that this proposed system will work.

Lastly, Transparency Vanuatu wishes to commend on the string of public consultations that has been undertaken by the Revenue Review Project Team, it is a challenging task, it consumes energy and time, but it must be done. Everything that will go through parliament must go through a participatory consultation process so that everyone is aware of, and participates, in shaping Vanuatu’s future.




tivnews – eNewsletter Issue 3 Published, Download Your Copy

FROM THE MONTHS of August to September Transparency International Vanuatu was heavily involved in a community consultation campaign on the islands of Pentecost and Ambrym.

CLICK HERE to download this e-newsletter to learn more of this community campaign.


Vanuatu In The UNCAC Review Report

VANUATU BECAME A SIGNATORY to the United Nations Convention Against Corruption (UNCAC) in 2011, also 11 other Pacific countries that have also signed the UNCAC.

Technically, when Vanuatu became a signatory to the UNCAC then the government is obliged to adapt the UNCAC regulations into Vanuatu’s legal framework in order to strengthen anti-corruption mechanisms in the country.

The United Nations Office on Drugs and Crime (UNODC) and the United Nations

Development Program (UNDP) published two reports under the Pacific Regional Anti-Corruption (UN-PRAC) project.

These reports provide an outline of the Pacific’s implementation of Chapter III (Criminalization and Law Enforcement) and Chapter IV (International Cooperation) of the UNCAC. From the reports we identify some of the mechanisms that have been implemented under from the UNCAC.

Anti-Corruption Bodies

According to the report ‘Pacific Implementation of UNCAC Chapter III out of the 11 Pacific countries that signed the UNCAC 10 of them have established relevant anti-corruption bodies, and Vanuatu is one of them.


Click on the above image to download this report.

Vanuatu has several anti-corruption offices established by the government, they are; Office of the Attorney General (State Law), the Office of the Public Prosecutor, the Office of the Ombudsman, the Public Service Commission, the Vanuatu Financial Intelligence Unit and the Professional Standard Unit.

Public Official Offences

Secondly, the UNCAC requires state parties to establish certain offences by public officials as crimes. These includes bribery public officials, embezzlement, misappropriation, diversion of property by a public official, laundering of proceeds of crime and obstruction of justice.

Article 65(2) of the UNCAC also stipulates that; “Each State Party may adopt more strict or severe measures than those provided for by this Convention for preventing and combating corruption”.

Chapter III of UNCAC recognizes “the importance of having a means by which to deter and punish corruption. The Convention requires States to establish criminal and other offences to cover corrupt acts, if these are not already crimes under their domestic law. It includes both mandatory provisions and recommendations to be considered by States parties. Chapter III also focuses on the public and private sectors.”

Defining Public Officials

Who is a public official? According to article 2 of the UNCAC a ’Public official’ shall mean: (i) any person holding a legislative, executive, administrative or judicial office of a State Party, whether appointed or elected, whether permanent or temporary, whether paid or unpaid, irrespective of that person’s seniority; (ii) any other person who performs a public function, including for a public agency or public enterprise, or provides a public service, as defined in the domestic law of the State Party and as applied in the pertinent area of law of that State Party; (iii) any other person defined as a “public official” in the domestic law of a State Party’.

In the Pacific, member States identify ‘public official’ or ‘public servant’ in line with the above UNCAC definition and to variable steps.

For Vanuatu, “it was noted that any member of a public body would be widely interpreted to include Members of Parliament. However, the reviewing experts recommended that Vanuatu ensure that the definition of public officer covers the scope defined in article 2(a) of the Convention and includes a person who performs a public function for a public enterprise”.

Abuse of Functions

Article 19 of the UNCAC obliges States parties to look into criminalizing the abuse of functions by public officials. The abuse of functions is explained as the “failure to perform an act, for the purpose of obtaining an undue advantage for him or herself or for another person or entity”.

Several States have implemented this article while others have not yet implemented theirs, Vanuatu is one of those countries that has implemented such provisions in place which is the Leadership Code Act (LCA) that was enacted in 1999, and interestingly the LCA was implemented a decade before Vanuatu signed the UNCAC.


The information contained in this this article is based on the outcome of the UNCAC Implementation Review Mechanism in the Pacific region until mid-2015. The countries that were covered are the Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, Palau, Papua New Guinea, Republic of the Marshall Islands, Solomon Islands and Vanuatu.

The implementation of Chapter III of the Convention varies across Pacific States parties. The review process identified a number of good practices, as well as differences and gaps in implementation.

The report also covers the implementation of anti-corruption mechanisms in the private sector and many other areas, and can be used as a resources for research.

TIV Chairman acknowledges government’s establishment of Anti-Corruption Committee.

TRANSPARENCY INTERNATIONAL VANUATU (TIV) Dr. Willie Tokon acknowledges the initiative taken by the Government of Vanuatu to establish, and to include TIV as a member in the Anti-Corruption Committee, thus recognizing TIV’s 15 years of advocacy against corruption in Vanuatu.

“This is a big leap for TIV as an anti-corruption advocator in Vanuatu. We advocate against corruption every day and every week using the media, the radio, through our networks, and throughout our community campaign programs. And to be included in such an important committee is a privilege that we will surely support completely” says Dr. Tokon.

“On behalf of the organisation that I represent I would like to acknowledge the government of Vanuatu for having confidence in our work, and our inclusion in the membership of the Anti-Corruption Committee, and we look forward to further collaborations in the future” acknowledges Dr. Tokon.

CLICK HERE to read the full story published by the Vanuatu Daily Post.

Efate Offshore Islands RTI Campaign Kick-Starts Next Week

OFFICERS FROM TRANSPARENCY INTERNATIONAL VANUATU (TIV) will be continuing the Right To Information (RTI) Bill Campaign to the island of Emau next week on Tuesday the 18th of October.

After successfully completing the RTI Bill Campaign around the island of Ambrym last month the TIV Team is focused now on visiting the Efate Offshore Islands to inform them about the RTI Bill. And the first island to be visited is the island of Emau.

The TIV Team is expected to begin the RTI awareness at ten o’clock (10:00am) at the Mangarongo Centre School, and invites village leaders and people from the villages of Mapua, Mangarongo, and Marou.

In the afternoon, a second RTI awareness will be held at Wiana village and people from the neighboring villages of Lausake and Ngurua could also attend there.

Transparency International Vanuatu, with financial assistance from the Pacific Leadership Program (PLP), has been conducting a year-long campaign since 2015 on the RTI Bill.

Our goals are to inform the people on the contents of the RTI Bill and how it will impact their lives when it becomes law, and to collectively gather and publish their opinions to the general public and to the Members of Parliament (MP) so that we can all share one voice and one vision when the time comes to talk about the RTI Bill when Parliament is in session.

After Emau, the next islands to be visited before the end of this month are the islands of Lelepa, Moso, Pele, and Nguna.

South East Ambrym RTI Consultation Completed

THE RIGHT TO INFORMATION BILL community awareness/consultation campaign conducted by Transparency International Vanuatu (TIV) throughout the south eastern part of the island of Ambrym was completed successfully after reaching almost fifty percent (50%) of the population during the first three days of the 10th RTI Bill Consultation.

The TIV Team on the island began the campaign at the village of Endu, which is close to the north eastern part of the island, and finished at Taviak village which the southernmost village in the south east region of Ambrym island.


Feedback received by community leaders had been positive, at every meeting everyone showed support for the RTI Bill. A law enforcement officer on the island expressed his appreciate for the RTI Bill when he said that “If this Bill pass I will be very happy. It will help us a lot. For now everything is easier for the people in Port Vila. But when this RTI Bill becomes law it will be easier for us in the rural areas to access information”.

“This information is exactly what the people of South East need” said the Area Secretary of the South East Ambrym Area Council Mr. Kerbi.

Mr. Kerbi had joined the TIV Team right at the start, and was there to farewell them when they journeyed on by boat to the western side of the island to continue the consultation process. He was instrumental in organising the community meetings and arranging the each days’ schedules.

Almost one thousand (1,000) people of south east Ambrym were informed of the RTI Bill, and a hundred percent of them showed support for the RTI Bill.


The TIV Team that is doing the community consultation work is looking forward to move on to the next region which is the Efate Offshore Islands. When the preparation stages are complete Transparency International Vanuatu will continue to update you on its community consultation schedules.

Also, this notice also goes out to the people of Erromango, if you would like the TIV Teamambrym-rti to come to your village please contact us by Tel: 25175, or you can visit the office so that we can begin to identify the places we can visit.

Again, this RTI Bill will affect us all, therefore it is important to know about it before it becomes law. Transparency International Vanuatu, with assistance from our partners will continue to lobby, advocate, and push for anti-corruption tools like the RTI Bill to become a reality so that we can achieve transparency and accountability in our decisions and choices.


This RTI campaign tours are funded by the Pacific Leadership Program (PLP) who supports Transparency International Vanuatu’s work with the Government’s Right to Information (RTI) Unit to raise awareness and promote public interest in the RTI Policy and Bill. PLP’s support has enabled TIV to campaign in communities and schools and host public forums on the RTI Policy and Bill, using its strong networks in the provinces.



“Call To Pardon, Based On Custom, Is A Very Dangerous Call”: Dr. Tokon

THE VANUATU JUDICIARY SYSTEM set a high benchmark when the Vanuatu Supreme Court sentenced the corrupt politicians to prison in 2015 and it must not look back, says Transparency International Vanuatu Chairman Dr. Willie Tokon.

Commenting on Barak Sope’s comment – who said that if he was President he would pardon the jailed politicians, Dr. Tokon says that this would be unfair because it would be like having two separate laws; one for ordinary citizens, and one only for leaders.

CLICK HERE to read Barak Sope’s comment in an interview with Radio New Zealand.

Dr. Tokon says that he understands that Mr. Barak’s comments may be coming from the traditional perspective -the respect for custom, but he says that we are living in the new era where traditional values must work alongside the rule of law, and not above it.

“For those of us who grew up during those early years – fifty to sixty years ago, we can definitely understand this traditional reasoning, but for the rest of us thirty years and younger this may make no sense at all because everyone today expects ‘Justice for All, and All for Justice’. In custom, leaders can be treated different as custom dictates, but that must not be the same with the rule of law. Hence, the thought of freeing the jailed politicians is a very dangerous call” Dr. Tokon says.

Talking with Radio Australia Dr. Tokon says that he knows that some of the jailed politicians are very sick and their health conditions will only get worse in prison, but the right thing to do is to appeal to the Parole Board.

CLICK HERE to listen to the audio interview with Radio Australia Tok Pisin Service.