Government changes financial year – Tax, ‘Christmasitis’ and Weather main reasons
The government today announced a significant change to their financial year, which will now begin on the 1st of August and end on the 31st of July the following year. Minister for Finance, Aiyaz Sayed-Khaiyum in a press briefing today said his Ministry had consulted with the World Bank since December last year on the […]
Ashutosh Singh / Calvin Prasad
March 28, 2016 4:53 pm
The government today announced a significant change to their financial year, which will now begin on the 1st of August and end on the 31st of July the following year.
Minister for Finance, Aiyaz Sayed-Khaiyum in a press briefing today said his Ministry had consulted with the World Bank since December last year on the changes.
Minister Sayed-Khaiyum said there were three major reasons for the change:
- Tax collection is usually done in the months of April, June, September and December. This affected the budget deficit for the following financial year.
- “Many countries suffer from ‘Christmasitis,’ where people go on a ‘holiday mode’ in November/December.”
- Fiji’s cyclone season is from November to April. “We can have a very good budget approved in November, but suddenly in a month, it can all go out in a whack.”
Minister Sayed-Khaiyum said the current budget would now be in effect from January 1st to July 21st, 2016. The government would request Parliament to bring forward the session scheduled for November to July, to present a budget for the next financial year.
It’s a significant move, but nonetheless a very positive move, because it takes into account the situation on the ground, the adminitrative realities, and also issues pertaining to companies and revenue collections, and of course the issue pertaining to climate change.
Minister Sayed-Khaiyum gave reasons why the government has resorted to this implementation, Firstly is that the end of the fiscal year also coincides with the month in which many companies make their text payment.
So what it means is that the tax payments that we receive in that month is generally the last day of our financial year and because it is paid at the last minute it does not hit the government books on that day itself. The example that we gave was that an excess of $60million was paid last year by companies as taxes on the last day of December, now that $60million did not hit the government books, it hit the books of FRCA but because it was the end of the business day it did not hit the books of government.
Minister Sayed-Khaiyum added that they had taken into account the current budget for 2015.
We had taken into account the now budget for 2015 that we will be receiving that amount of money, whilst we did receive it, we actually did not receive it directly ourselves because it has to go through FRCA first, so that $16million was not accounted for in our 2015 budget, it spilled over into 2016.
The Minister said given the fact that tax is collected in the months of April, June, September and December it’s not good to have your financial year end the same time as when the tax payments are due.
We need to have a financial year where the tax is already collected so then we can predict better and the figure would be a lot more accurate.
The second reason the minister explained for the change is to allow time for the approval of the budget.
When we deliver the budget in November and your budget year commences on the first of January we need to plan for the implementation for once the budget is approved and if your budget is approved at the end of November and you are supposed to start your financial year at the first of January, you only have one month to plan to get everybody together to say what exactly we will do and that is the holiday season, your ability to get everybody’s focus and everybody’s presence is limited.
The third reason was an adaptation measure the government is taking to avoid making predictions in the budget which is made before the cyclone season.
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