The vision for Tuvalu’s development in the next decade 2005-15 is found in the National Strategy for Sustainable Development Te Kakeega. This states that the capacity development of the public sector management and the enhancement of the private sector as the two major forces of change in Tuvalu which relies so much on the tax revenue.
The country however has been recording fiscal deficits since the year 2003 which has pushed the government to consider the irregularities in the flow of revenues.
These deficits are the rationale behind Tuvalu’s intended taxation reforms that include equal opportunities in the area of business tax, exclusion of low-income earners from the personal income tax regime and replacement of the duties and charges on imports by a broad-based consumption tax.
Tuvalu is one of the small island states situated in the Pacific Ocean, and it is known that the taxation legislation of this country is quite simple and, in a certain sense, noncomplex.
A guide tailored for ex-pats to understand the tax system in Tuvalu
Below is a general guide specifically for expatriates to explain the taxation system in Tuvalu.
In this regard, one is likely to observe that the taxation system within Tuvalu is relatively easy to comprehend in comparison to many other nations across the globe. Therefore the government collects its revenues from foreign aid, the sale of fishing licenses and through the Internet country code top-level domain ‘. tv’. Here are the key components of the tax system:
Income Tax
Likewise, there is no provision for resident or non-resident personal income tax in Tuvalu as well. For this reason, it becomes a first option for people who do not want to be involved in the encumbers that are attached to tax filing procedures.
Customs duties
Customs duties constitute the taxes on imported products into Tuvalu. These rates vary with the type of goods but this is one of the most significant sources of government revenue.
Other Taxes
As for other minor taxes and fees such as the sales tax on certain goods and services these are not considered large for most expatriates.
Filing requirements
To date, there is no filing of income tax returns as there is no personal income tax in Tuvalu for the expatriates. However, if the expatriate is operating a business in Tuvalu he or she has to pay corporate tax and file returns as required.
International Tax considerations
Another thing that expats also have to learn is their taxation obligations in their home country. Some countries use a regime of taxation of individuals based on their earnings anywhere in the world. It is necessary to contact a Tax consultant to find out if any taxes are charged in Tuvalu and back home.
Thus, in 2007 the Asian Development Bank turned to the Adam Smith International to assist the Tuvalu Inland Revenue Department by applying the set of the tax and customs reform policies among which the IRC proposed to the Parliament three bills later. These changes enabled Tuvalu to meet the requirements resulting from the free trade agreement of the country within the region. On the other hand, they introduced a new system of taxation with the planned introduction of the VAT alongside the cuts to income taxes. It also provided the abolition of sales tax and imposition of excise duties.
The change in these aspects was very effective in the protection of the wealth of Tuvalu and as indicated by IMF, the further continuation of the reform of taxes is the only way through which the country can continue to compete in the international market.
Conclusion
As it has been stated, the taxation in Tuvalu is relatively basic: There are no provisions for personal income tax, and the provisions for the corporate tax are rather well-defined. However, the expats should ensure they get acquainted with the tax laws of their home country so that they do not violate any of them. Any issues involving taxes in the international setting should be referred to a tax advisor.
The management of stronger revenue flows will also help the Tuvalu government in its quest to deliver public services better as well as get more pro-growth public investment.
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