By Lindsay Barret

As a 50-year resident of Vanuatu, I am compelled to put into writing my feelings about the direction that the Vanuatu Government is moving when it comes to Revenue Policy.

I am certainly not alone when I say that the current direction being taken by our Revenue Policy Unit spells Disaster!

The latest so-called “consultation” meeting in early September, outlining Business Licence Reforms and Fees typifies the current trend being taken whereby a “consultation meeting “becomes a platform for the architects of these regressive proposals, to bulldoze the public into accepting what was presented as a fait accompli. We were simply told “this is what we are going to do”.

Business Licence Fees

I use the word “regressive” deliberately Nowhere in the world can a Business Licence Fee based on turnover possibly be fair, nor could it be fairly administered in Vanuatu.

It is not fair because it assumes all businesses make the same profit from the same turnover.

Any fee (or tax by any other name)based on turnover cannot possibly be equitable, as it does not take into account the costs of producing the turnover. How can a small family retail shop’s turnover be compared to, say, a hotel’s turnover?

The answer, of course, is that it cannot and any tax (or licence fee) based on turnover must by its very nature be unfair, inequitable, discriminatory, unjust, biased, and above all, undemocratic.

Another matter which is aggravating the extreme is the hell-bent rush to simply roll over to meet the demands of the OECD and EU without adequately considering what is best for Vanuatu.

The Revenue Policy Unit (or Task Force),led by Mr Ian Pittar, is funded by – guess who? – an aid agency funded by big country aid donors who are attempting to impose taxes which, in their own words” ARE INTENDED TO PREVENTENTITIES USING ZERO OR NEAR ZEROTAX JURISDICTIONS TO AVOID TAX”. No-one seems to understand that the worst-affected entities will be local businesses which are already being clobbered by COVID-19 restrictions.

I now turn to the question of “economic substance”. Our Revenue Policy Unit thinks that every “entity” using Vanuatu’s low tax regime needs to have “economic substance”, or else it will pay an even higher business licence fee which simply means that the unequitable basis on which the proposed new licence fee is based will be even more unfair, more inequitable, and even more undemocratic.

Part of the recent “consultation “meeting went on to say that “The Modernized Business Licence Fee is NOT income tax”. That is correct, but for the reasons stated above, it is much, much worse! Income tax normally is based on net income; this tax (sorry, license fee), totally ignores that, and worse again, tries to tell us that it isn’t really a tax!! Who is kidding who? Somehow, and I do not know how, “modernizing” the Business License Act to introduce a totally undemocratic tax, disguised as a licence fee, is supposed to overcome this? The short answer is that it does not do so.

Vanuatu has a perfect right to say ‘no’ to this type of tax, and should.

International Companies

Another totally unworthy recommendation seems to be that International Companies will be treated like local companies and businesses. Someone needs to take a reality check. There is no possible way that International Companies will be able to be “controlled” for tax purposes from Vanuatu. Our very own legislation demands that their business be conducted offshore; previous Governments have guaranteed that they will not be subject to income or other similar taxes for 20 years. It would seem that our Revenue Task Force has ignored these legislated benefits and is creating its own agenda, designed, and paid for, by “Big Brother” nations who use the aid carrot and big banks to get their own way.

This undermines Vanuatu’s integrity, its right to choose as a free nation, and its very soul.

Economic Substance

The Revenue Task Force provided definitions and opinions on what “Economic Substance” means to the EU and OECD.

Without putting too fine a point on it, even the OECD and EU requirements for economic substance are unclear. This is a very wide subject, but let us examine what basic economic substance is using the RPU’s own words:- •“Must require companies (etc.) to have substance in Vanuatu

•Vanuatu can’t provide benefits (such as tax exemptions to companies which do not trade in the jurisdiction) unless those benefits are available generally to all companies.

Doesn’t anyone see that these two requirements are totally contradictory? How can there be “substance” in Vanuatu when the company’s directors, shareholders and activities are all outside of Vanuatu, and Vanuatu’s own laws demand it? Profits made by Vanuatu’s International Companies are rightfully taxed in the beneficial owner’s home country.

If, then, we conclude that International Companies cannot have “substance” in Vanuatu, then to try to impose a top rate Business Licence Fee on those companies will be like trying to herd cats, especially if the fee is based on a turnover that Vanuatu Tax Authorities will have little or no means of verifying.

In this regard, Vanuatu currently does not impose income taxes on local companies and entities, so that benefit is “available generally to all companies and entities”, thus International Companies do not benefit any more than local entities. i.e. Neither pay Income Tax

Income Tax

I have deliberately left aside to this point the other nonsensical proposition that an income tax be introduced in Vanuatu. That too seems to be the ultimate aim of the EU and OECD. This is an even more irresponsible idea than basing a Business Licence Fee on turnover. What seems to be totally forgotten is that geographically Vanuatu is spread over 83 Islands, there is still a huge “cash economy” in many islands, records are poorly kept, the population is small, the number of taxpayers who may get caught in the income tax net will be so small that they may not even generate enough income to justify the cost of administration. If this cloud were not on the horizon, then there may be some small justification to increase existing taxes and fees, but unfortunately it is.

Vanuatu is simply not ready for an Income tax regime, and there are many logical and persuasive economic arguments to support that view and very few intelligent people in Vanuatu support it.


As long as Vanuatu does not stand up to the OECD and EU, and forcefully justify what is right for our nation, we will continue to be steamrolled, abused and trampled upon with total disrespect by dictatorial bullies like these unfeeling European academics who know little about us.

Lindsay Barrett, C.A., T.E.P. economic arguments to support that view and very few intelligent people in Vanuatu support it.

Lindsay Barrett, C.A., T.E.P.

I advise that these are my personal opinions, and do not necessarily reflect the views of my firm (Barrett & Partners).