Transcript
WALTER ZWEIFEL: Seven main taxes will be replaced by one. New Caledonia has had a raft of levies, creating such as a complex system of import duties that, according to some calculations, there were 700,000 possible combinations. There were also exemptions. Now with the consumption tax, or TGC, things are being simplified. This will make tax collection easier and there is a transparency not seen before.
DOMINIC GODFREY: Is there a single tax rate?
WZ: No - there is a regular rate of 11 percent but basic consumer goods get taxed at 3 percent only while luxury items get taxed at 22 percent. The lowest rate applies for food and basic hygiene products while the highest rate applies to sugary drinks and alcohol as well as cars although there concessions are being made for electric vehicles for example.
DG: How easy is the transition?
WZ: The devil is in the detail. The tax was to come into force at the beginning of July but it was put off. Challenges emanated from a range of angles, such as reimbursing import duties for stock already onshore and then squabbles over what the margins should be, given that a key objective of the reform is to lower prices. In recent weeks, the question of what margins can be levied has been a point of contention. For a year there will be price controls on many basic items in a bid to prevent high inflation.
DG: What's the squabble about?
WZ: Basically there is a disagreement between the government and the employer federation over what the various margins should be. Employers are incensed at the government list and protested outside the seat of government in their hundreds. They even shut petrol stations for half a day but failed to sway the government to accept the employers' list. There has been fighting talk from the employers’ federation head who warned of imminent unspecified action, saying they had the means to paralyse the country.
DG: Now all this is said to be done to fight high prices. How serious is the problem?
WZ: In recent history, nothing has agitated New Caledonia's public more than the cost of living. The yard stick is France and people know that they end up paying much more for identical global products. In some cases, they are being charged up to double the price. Over the years, there have been huge protests - seven years ago, 25,000 people took to the streets to press for change. And five years ago, there was a 12-day general strike over the same problem. The tax reform is part of this long and convoluted process to get on top of the high cost of living. What however remains is a relatively small economy with little competition. According to the head of the recently established competition authority, 10 family groups control 80 percent of the economy.
