Deferred levy finally set in Tonga

Transcript

A controversial levy on foreign exchange transactions in Tonga will come into effect on Friday.

The one seniti levy is to help pay for the 2019 Pacific Games which Tonga will host.

Concern has been expressed over the lack of public consultation and how the levy will affect people at the grassroots level.

Finance Minister 'Aisake Eke told Koro Vaka'uta what has been holding up implementation of the twice-deferred levy.

AISAKE EKE: We had some discussion and we found out that there are some inconsistencies between the English version of the foreign exchange levy act and also the Tongan version. The Tongan version is the correct one. We will submit a bill to the legislative assembly when they will open in February next year to amend the English version so that it is consistent with the Tongan version. We will also have to amend the Financial Institution Act for the coverage for the definition of international institutions. Because at the moment the positions of the foreign levy is only legal to be done by banks themselves, not the money operators. The money operators are yet to be included. We will be presenting a draft of the regulations to the financial institutions, the banks themselves just for some feedback from them before we actually submit it to Cabinet.

KORO VAKAUTA: So those financial institutions we are not talking about banks, although they were not initially covered are included from Friday?

AE: Yea not included in enforcement of this one, but we will be amending the relevant act in February.

KV: How does it work this one percent levy, will it be charged to the bank on monies exchanged?

AE: It is one seniti that is the actual wording that we use in the legislation. Basically how it will be enforced is basically that the one seniti taken out from the Tongan Pa'anga equivalent of the spread, gross profit if you like that the bank has taken off for more transactions of foreign currency.

KV: At this stage it is up to the bank or the money operators whether they absorb the cost or the levy or they pass it on to customers yea?

AE: It is up to them but you know what the purpose of this is basically to share with the banks you know the cross market of the spread they actually enjoy currently from Foreign transaction takings.

KV: How much is the government hoping to raise from this levy for the games?

AE: What we plan to reach here is one million or two million Pa'anga  that was our calculation to start collections from July to June next year but at the same time when we reviewed the actual data, average foreign currency and the actual spread that have been made by the banks in the last financial year. I think it is very much likely that we are going to meet the budget targets. Starting July next year we will be changing the act again to reduce the levy from one seniti of the spread to half a seniti.

KV: It is estimated that Tonga will need around about 80 million Pa'anga. is this worth it?

AE: :Levy will be part of our fundraising and will be in force up to 2019 ah 2020 financial year so we are expecting at least say $2million Pa'anga will be collected every year so it is more than $10 million Pa'anga we are expecting to be collected from this source.