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COMPLIANCE IMPROVEMENT STRATEGY 2019-2021 COMPANY NAME

YOUR ACTIVITY

Compliance Improvement Strategy

2019 - 2021

TABLE OFCONTENTS

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER 4

INTRODUCTION 5

ELECTRONIC FISCAL DEVICE (EFD) 7

REVENUE PERFORMANCE 8

PERFORMANCE OF 2017-2018 CIS STRATEGIES 9

OUR APPROACH TO COMPLIANCE 10

ELECTRONIC FISCAL DEVICE (EFD) 10

TAXPAYER ONLINE SERVICES (TPOS) 13

GOLD CARD SERVICES 14

AUTHORIZED ECONOMIC OPERATOR (AEO) 15

ORGANIZATIONAL IMPROVEMENTS 16

ISSUES AND SEGMENTS SELECTED 17

ISSUES AND SEGMENT STRATEGIES

CUSTOMER SERVICE 18

LARGE & INTERNATIONAL 19

TOURISM INDUSTRY 20

CONSTRUCTION INDUSTRY 21

TRANSPORT INDUSTRY 22

VALUE ADDED TAX 23

BORDER SECURITY 24

CUSTOMS REVENUE 25

CUSTOMS COMPLIANCE 26

ACRONYMS / ABBREVIATIONS 27

Compliance Improvement Strategy 2019-2021 3

MESSAGEFROM THE CHIEF EXECUTIVE OFFICER

Visvanath Das

Chief Executive Officer

I am delighted to present the 2019 – 2021 Compliance Improvement Strategy. It outlines a road-map for us as an

organization to improve service delivery to our customers over the coming years. At the same time, it conveys the key

Tax issues and compliance risks that we will be focusing on. Ultimately, we expect that delivery of this strategy will

aid in building a healthier community and a stronger Fijian economy.

The task of formulating the Compliance Improvement Strategy cascades off of our strategic planning processes. That

enables us to take stock of past successes and failures, both of which have informed the activities presented in this

document. Through a variety of channels, a great deal of input has also been sourced from our customers. While we

have traditionally been known as an Authority, in recent years we have committed to transitioning the entirety of our

operations to a customer-centric approach. Our commitment is reflected throughout this strategy.

In all of our work, we are striving to achieve a “world class” revenue service. This ongoing transformation is boldly

moving forward on the shoulders of our talented staff. It is reflected in the foundational projects now underway,

including implementation of a New Tax Information System and Electronic Fiscal Device system. While we invest

a great deal of our time building services to promote voluntary compliance, we are also cracking down hard on Tax

evasion.

I am confident that our talented staff in partnership with our stakeholders will deliver on this strategy and that the

goals that we aspire to will translate into change which we can all be proud of.

4Compliance Improvement

Strategy 2019-2021

TAXPAYER ONLINE SERVICES(TPOS)

The Fijian Government continues to support the Fiji Revenue & Customs Service (FRCS) in its commitment to create

simplicity in the tax legislations and provide a reliable way where taxpayers are willing to comply. As such, through

these legislation refinements, FRCS is able to effectively implement new processes that will ensure a higher level of

tax compliance. The Taxpayer Online Services System is a self-service tax system that operates on an online platform.

It is designed to assist the tax office to provide a wider range of tax and customs services through the digital space.

The taxpayer online services system will allow taxpayers to experience and access a wide range of tax services with

just a click of a button which can be done from the comfort of their homes.

Once the system is live and up to date with

your information;

• all your tax requirements will be pre-

populated e.g. your personal income

returns, your rental income or small

business details will also appear

• you can make payments online

• minimal visit to our office

GOING DIGITAL

• If you have a Joint ID card log on to;

myinfo.frcs.org.fj

• Visit the nearest Revenue and Customs

Office to complete a form

HOW TO UPDATE YOUR INFORMATION?


The Electronic Fiscal Device system was rolled out in 2017, with the intent to help businesses improve management

of their transactional business dealings, ease administrative procedures, encourage voluntary compliance and

crack down on tax evasion. The system contributes to the broader role in alignment to the government roadmap

for the development of Fiji through greater financial inclusion initiatives as well as a push towards a cashless

economy which will then address the black economy challenges..

IMPLEMENTATION OF ELECTRONIC FISCAL DEVICE

Roles and Responsibilities• Taxpayer: Held accountable to

comply• POS & ESDC Supplier: Solution

providers(s)• Customer: Report anomalies• FRCS: Enforcement and Monitoring

Taxpayer Process• Register through the FRCS website &

update your information (VMS portal/MyInfo)

• Respond to email invitation to enroll for smart cards and use the admin smart card to request for more POS cards

• Activate EFD & Start issuing fiscal receipts

Choosing the right technical solution• Free FRCS POS, E-SDC, Soft SDC• Use more than 1 option• Mandatory to issue fiscal receipts;

always have a backup

Start Compliance journey early• Depending on your solution, it

can take 1 month or 6 months for suppliers to make changes

• Infringement penalties apply to the non-compliant taxpayers

• Activate EFD & Start issuing fiscal receipts

Look After Smart cards• Replacement fees apply FJD$50• Data may not be reported correctly

if the cards are not looked after properly

Key Tools


Strategy 2019-2021

INTRODUCTIONThe Fiji Revenue and Customs Service (FRCS) continues to improve its revenue collection year on year to support the

Fijian Government and Fijian people’s aspirations of growing the Fijian economy.

Apart from being the major funder of the National budget which is our primary mandate, Revenue and Customs

continues to contribute and spearhead broader National initiatives. These efforts linked to our strategic plan are

aligned to the Government’s National Development Plan to ensure inclusive socio-economic development as well as

delivery of transformational strategic goals.

The Compliance Improvement Strategy (CIS) follows from a prior, successful 2016-2017 initiative through which

Revenue and Customs collected a considerable amount in new revenues. Much of the success was achieved through

measures designed to improve voluntary compliance, both by delivering new services and targeting key risks with

enforcement measures.

The 2019-2021 CIS presents our current revenue performance and results of our prior strategy. It subsequently

describes our approach to compliance in general and outlines the actions that we will be taking to provide new

service and deter, detect and deal with those who choose not to meet their obligations. This is important for the

Integrity of both Tax and Customs compliance and we are once again focused on both areas of administration through

a collection of issue and segment strategies.

Each issue or segment strategy sets out our general approach to compliance and the risks that we will be focusing

on. The strategies describe our intended actions. Within each segment, metrics are defined to ensure that our

interventions in any one area are yielding the expected results. In each strategy, we have also provided some basic

data analysis that provides a high-level overview.

Some of the risks highlighted in this CIS document are the continuation of work we started in the previous CIS

document. Others are new activities where we are responding to emerging or changing threats or opportunities in

the Tax and Customs areas.

The 2019-2021 CIS also includes some of the major projects such as the TPOS and EFD which highlight

aspects of our compliance activities and their impact.

The CIS will help people better understand how Revenue and Customs

works towards encouraging voluntary compliance in the

community and amongst our stakeholders.


Revenue and Customs has increased its overall revenue collection over the past years. This is the direct result

of voluntary compliance initiatives introduced by FRCS including the Whistleblower program, internal reforms,

stakeholder engagement, legislative changes, taxpayer education and increased public awareness.

REVENUE PERFORMANCE

There was a gradual increase in customs revenue from 2014 to 2018. However, VAT revenue has shown a vast

decline in 2016 due to a decrease in the VAT rate from 15% to 9%. But it is gradually improving from 2017 to

2018. Likewise for Income Tax, total revenue increased till 2017, but has declined by 8.5% in 2018.

Net revenue has increased by 33% from 2014 to 2018.

8Compliance Improvement Strategy 2019-2021

PERFORMANCE OF 2017-2018 CIS STRATEGY

The 2017-2018 CIS was a huge success. The risk and treatments outlined were clearly implemented. However, there

were some treatments which are still in progress and we will continue those treatment strategies in the coming

financial year.

Below are some major implementations in 2017-2018 Financial Year

• New Financial Intelligence Team is set up to look into profiling cases

• Establishment of Case Management Forum

• Enhanced Customer Call Centre Services

• Introduction of Outbound Call Centre in LEU

• New Data Cleansing team for the New Tax System

• Greater public awareness to the public on tax obligations

• Use of social media platfroms

• MOU’s with relevant stakeholders such as REALB, LTA, & FNPF

• Extraction of Third Party data for profiling

• Door to Door project team visits to taxpayers

• Name and Shame legislation

• Prosecution of tax evaders

• EFD introduced for selected industries in phases

• Introduction of mandatory Tax Compliance Certificate

• Continuous analysis of third party data to detect non-compliance

• High Wealth Individual Database created for risk profiling


OUR APPROACH TO COMPLIANCE

One of the essential strategic objectives of this CIS is to increase voluntary compliance. FRCS strives to be

proficient in ensuring consistent application of legislation, with a professional approach and in the manner to

maintain confidence in the tax system and its administration. It is important to encourage voluntary compliance

with tax obligations for key types of taxes that leads to an increase in fiscal discipline, in order to increase the

collection of budgetary revenues, whilst consequently reducing the tax gap.

REGISTERING

ACCURACY OF TAX RETURNS INFORMATION

FILING TAX RETURNS ON TIME

PAYING TAXES ON TIME

Must be timely and accurate

Ensuring what is contained in a declaration is accurate and complete.

The date set by the law

The due date set by the law

Voluntary Compliance covers four main tax obligations:


Strategy 2019-2021

UNDERSTANDING CUSTOMER BEHAVIOR - THE COMPLIANCE PYRAMID

• Taxpayers willing to do the right thing - those who voluntarily comply with their tax obligations;

• Taxpayers who wish to adhere to, but do not always succeed - taxpayers that need help to comply with their

obligations;

• Taxpayers who do not want to fulfil their tax obligations - includes taxpayers where the appropriate measures

are applied such as inspection control and enforced collection;

• Taxpayers who are determined not to comply with their tax obligations this group includes taxpayers where

there is criminal liability, which is hard to fight, but the Tax Administration will use the full force of the law

against them, file criminal charges in cooperation with other relevant state institutions.

Create pressure down

Attitude to Compliance Compliance Strategy

Have decided

not to comply

Use full force of the law

Don’t want to comply

Try to comply, but

don’t always succeed

Willing to do the

right thing

Deter by detection

Assist to comply

Make it easy

Level of Compliance Costs

Economic Sociological

Industr

y

Psychological

Busi

ness

Customer

Source: OECD


OUR APPROACH TO COMPLIANCEELECTRONIC FISCAL DEVICE

Introduction of the Electronic Fiscal Device

The EFD system was introduced with the intent to ease the burden of doing business

through improved management of day to day affairs, ease administrative procedures,

create a level playing field and most importantly encourage voluntary compliance.

Extension of Compliance Period

To encourage and support businesses in their compliance journey, FRCS requested an

extension of time to the gazetted timeline for businesses that were in phases 1 & 2 of

the EFD implementation.

Stakeholder Engagement

Continuous engagement with the various industries and businesses are being carried

out to ensure product knowledge and information sharing between our stakeholders.

Supporting Small & Micro Enterprises (SME’s)

FRCS is now funding all SME EFD requirements to ease the burden of doing business

and at the same time to encourage voluntary compliance in this important sector.


Strategy 2019-2021

OUR APPROACH TO COMPLIANCETAXPAYER ONLINE SERVICES

Introduction of the Taxpayer Online Services(TPOS)

The TPOS system is being introduced to ease the burden of our customers and to

allow them to access a wide range of tax services from the comfort of their homes

with just a click of a button. It is a self-service tax system that operates on an online

platform which assists the tax office to provide a wider range of services.

TPOS Online Process

The TPOS system is the result of the digitalization of current manual functions being

carried out by the customer and the tax office. The introduction of TPOS means that

customers can access tax services electronically not only by the use of a computer

but also by using their electronic devices such as their phones and tablets as long as

it has internet access.

TPOS Abilities

The TPOS system is able to transmit and receive data in real time which enables FRCS

to provide tax services in a timely manner. One of the features of the system is its

ability to validate information online through an interface.

TPOS Information Accessibility

The TPOS system enables the customer to access their own tax information without

having to visit any of our offices which means there will be limited interactions be-

tween the customer and the tax office.


OUR APPROACH TO COMPLIANCEGOLD CARD SERVICES

Gold Card Services was established in 2012, following a

Government announcement that “priority and privileged

services will be accorded to those companies that are

compliant in the matters of Taxation and Customs”.

To become a member, taxpayers can apply to the FRCS CEO

and the selection is based on compliance in the matters of

Taxation and Customs.

The membership is valid for 2 years, however, the FRCS

CEO reserves the right to terminate or renew Gold Card

Membership. Subsidiaries of Gold Card members also

have access to Gold Card Services.

Currently FRCS has 80 Gold Card Taxpayers including

subsidiaries and they contribute to 60% of the total

revenue collected by the Service.

Gold Card Services include:

• Provide innovative solutions to all Tax and Customs

enquiries

• Expedite processing of tax clearance, tax returns,

stamp duty documents, applications for registration

for all tax types and review of assessments

• Expedite assessing and amendment of Single

Administrative Document (SAD)

• Accept Tax and Customs payments via online banking,

EFTPOS (debit and credit cards), cheque and cash

• Facilitate referrals within all revenue and customs

business units

• Provide privileged services with revenue and customs

stakeholders

• Fiji Airways Tabua Club membership and included

benefits

Other privileged services accessible to gold card holders

are as follows:

• Fiji Airports Limited: Express lane services for baggage

collection and escort services

• Biosecurity Authority of Fiji: Express lane priority

services for all inspection and clearance services

• Department of Immigration: Priority services for

passports and permits

• Fiji Airways: Priority check-in at the Tabua Club

counter

• Land Transport Authority: Express lane priority

services for all LTA services

FRCS continually monitors compliance levels of our Gold

Card members. Membership status may be re-considered

for members who are found to be consistently non-

compliant.


Strategy 2019-2021

Overview of AEO Framework

The World Customs Organization (WCO) was established

in 1952 as the Customs Co-operation Council (CCC). It is

an independent intergovernmental body whose mission

is to enhance the effectiveness and efficiency of Customs

administrations. The WCO represents 182 Customs ad-

ministrations across the globe that collectively process

approximately 98% of world trade.

In June 2005 the WCO Council adopted the SAFE Frame-

work of Standards to Secure and Facilitate Global Trade

(SAFE Framework) that would act as a deterrent to inter-

national terrorism, secure revenue collections and pro-

mote trade facilitation worldwide. In 2007, under the

WCO’s Customs to Business partnership programme, the

AEO Programme was introduced.

The AEO Programme is designed for “trusted traders”

who are able to demonstrate consistent quality, com-

pliance and trustworthiness in their supply chain. Under

this programme the “trusted traders” will be accorded

benefits by the Customs administrations to assist in the

movement of international cargo. Among the WCO mem-

bers, over 170 countries have submitted letters of intent

to implement the AEO system and the programme is cur-

rently in operation in many countries across the globe.

Fiji is the 80th country in the World and first in the region

to introduce AEO Programme.

The Fiji AEO Framework was established in 2018 and

is managed by the Gold Card Services. The pilot pro-

gramme was launched in June 2018 with Seven (7) Gold

Card companies. The programme was officially launched

on 25th January, 2019. The criteria for granting AEO sta-

tus are as follows;

• An excellent level of compliance

• Proper management of Records & Internal Control

• Proven Financial Viability

• Robust Supply Chain Security

The membership is valid for two (2) consecutive years,

however, the Chief Executive Officer of the Fiji Revenue

& Customs Service reserves the right to terminate or re-

new AEO Membership.

AEO benefits;

• Removal of bond guarantee

• Removal of bank guarantee

• Introduction of Deferred Payment System (DPS) to

allow member to pay their dues at the last working

day of the month

• Removal of late payment fee to be included under

the DPS

• Revoking of outdoor inspection fee and to be borne

by Revenue & Customs

AEO members will also be eligible to the following ser-

vices from our Partners;

• Expedite processing of applications by Ministry of

Health and Biosecurity Authority of Fiji

• Expedite cargo clearance from Ports Terminal Limit-

ed and from Air Terminal Services

OUR APPROACH TO COMPLIANCEAUTHORISED ECONOMIC OPERATOR (AEO)


OUR APPROACH TO COMPLIANCEORGANIZATIONAL IMPROVEMENTS

Formation of Risk Assessment and Financial Intelligence

Team (RAFIT)

RAFIT was setup in April 2018 with the merger of

the Customs Intelligence Unit from the Intelligence,

Compliance and Investigations (ICI) Division and the

Risk Assessment and Planning Team from the Corporate

Division. This team is now part of the Corporate Services

Division and reports to the Director Corporate Services.

The core function of the Team is to identify revenue risk

cases for audit and investigations through intelligence

development from Revenue and Customs data and

internal /external information sources and databases.

Also, the team is responsible for CIS where they identify

the high-risk sectors and develop strategies for the risk

and treatments.

ASYCUDA World Improvements

• Single Window Project with MOH and BAF -

Incorporating profiling by other border agencies by

process automation. ASYCUDA routing delegated to

agencies for faster processing and seamless trade

facilitation

• Automation of Infringement notices - A Customs

Infringement Notice is a regulatory tool used to

cost effectively identify businesses who contravene

certain consumer protection provisions in relation to

duty decreases by the Minister in the National Budget.

• Automation of Cargo Transfer System – Together with

Biosecurity Authority of Fiji and Ministry of Health

and Medical services. Container Pass Document for

B/L and Container Pass Document for SAD

• Customs Intelligence Database - Centralized database

which records all incidences that can be used for

analysis

• Duties and Taxes Simulator - The Duties and Taxes

simulator is a tariff simulator that gives importers/

consumers a fair idea of the tax they are liable to pay.

Other organizational improvements to increase

compliance are:

• Formation of the Case Forum – for discussion of the

ICI cases and dissemination once approved;

• Formation of Design and Monitoring Team – to ensure

the treatments are successfully implemented by the

appropriate business units;

• New MOU’s – currently we have 29 MOU’s with

government and private organizations;

• PAYE (Pay as you earn) – Site inspections to be carried

out to ensure workers’ pay PAYE taxes and that EMS

monthly returns are accurate and filed on time;

• Public awareness of tax obligations by FRCS’s Public

Relations Team;

• Guidelines available on the website for new

registrants on their tax obligations;

• Talk Tax articles available on website to update on the

latest tax issues and changes in policies;

• FRCS officials to attending Fiji Institute of Accountants

workshops and conferences to communicate better

with tax agents, stakeholders and other associated

parties;

• TV advertisement and media release for tax

obligations;

• Awareness in the media for customers to demand

receipts/invoices.

• Enhanced customer call center services.


Strategy 2019-2021

COMPLIANCE STRATEGIES FOR 2019/2021

The following sectors and segments have been selected for inclusion in this strategy.

Customer Service Large & International

Tourism Transport

Construction VAT

Customs Revenue Customs Compliance

Border Security


COMPLIANCE STRATEGY: CUSTOMER SERVICES

STRATEGY OVERVIEWGood customer service is the result of the right attention to strategy, business processes, technology, and people management. Introduction of VMS and NTIS will assists customer service teams in achieving customer success. These tools improve workflow efficiency and make it easier for FRCS to provide effective service and solutions to their customers.

Our Risks Our Strategies

• Lack of knowledge on different tax types for new registrants

• Customers voluntarily register for VAT with the intention to claim VAT refunds.

• Customers doing business but not registered as business customers e.g. Salary & Wage Earners and Filing Not Necessary (FNN)

• High queuing time during month end. Customers leave taxation obligations till the last minute

• Transitioning of taxpayers into NTIS and VMS. Adaptation to the digital environment.

• More educational awareness to be imparted to the customers through awareness videos, talk back shows, road shows, advisories, chat room, TAX TALK articles/ media publications to reduce the knowledge gap.

• Basic trainings to be provided to customers; YouTube tutorial videos on registration and filing processes and guidelines specific to FRCS requirements.

• E-Services to be provided such as E-filing, E-payments and E-certificates (i.e. for registration and tax clearance) to make filing and registration much more convenient for customers – Through NTIS.

• Having self-service kiosks to improve efficiency• Reminder letters, general emails/ SMS can be sent to customers to

comply to their tax obligations.• Customer surveys to be conducted to have a better understating

of customer’s feedback and working towards improving customer satisfaction.

COMPLIANCE EFFECTIVENESS

1) % increase in customer satisfaction

2) % increase in on-time filing

3) % increase in customers using E-Services.

4) % increase in use of MySay / MyInfo portals

CUSTOMER SERVICE AT A GLANCE

Registration by Tax Type

PopulationForm Type

425,925Salary

53,847Business

11,911Company

4,970Trust & Estate

2,927Partnership

VAT and Trade registrants

15,575VAT

27,048Customs Traders

Based on 2018 registration & Receiptsdata

Registration by District

Total Revenue


Strategy 2019-2021

Total TaxPaid $M

No. of Cus-tomers

Industry

142.846Manufacturing

121.116 Accommodation & Food Services

110.315 Financial andInsurance Activities

103.447Wholesale & Retail

85.413 Transport andStorage

62.113 Electricity, Gas, Steam

60.08 Information andCommunication

12.07 Administrative &Support

10.59Construction

5.72Agriculture

STRATEGY OVERVIEWThe Large & International taxpayers are compliant particularly in the area of filing of returns and payment obligations. However, they tend to employ smart tax evasion tactics while doing financial reporting for tax purposes. Taxpayers in this segment are also utilizing the services of professional consultants to implement aggressive tax planning and tax evasion schemes. The strategy to improve compliance of the Large & International sector proposes more severe punishments and penalties in terms of thorough investigations and criminal prosecutions.


• Failure to withhold, report and remit withholding taxes – PAYE, PT, Royalty etc.

• Non-declaration of offshore income and assets.

• Profit shifting done by shifting Head Office from a higher tax jurisdiction to a lower tax jurisdiction to avoid paying taxes.

• Double invoicing whereby two different set of invoices are prepared to suit the purpose for Customs and Tax.

• Cross border arrangements in particular where related parties are not dealing at arm’s length.

• Aggressive tax planning by some tax preparers and accountants.

• Strengthening of Anti – Avoidance provisions and information exchange with overseas partners & revenue authorities.

• Publication of Advanced Rulings and TAX TALK articles focusing on Anti Avoidance; SIG’s publication, guidelines and practice statements to be updated.

• Analyzing third party data from FFIU, banks, LTA, RBF and other agency and fully utilizing the MOUs.

• Pursuing automatic exchange of information through multilateral agreements.

• Introduction of new techniques to detect practices such as profit shifting. Proposal for legislative changes can be made to tackle the issue.

• Use of data analytics for tax and trade data. • Focusing on transfer pricing audits as well as increased use of

transfer pricing databases (BVD).


1) % increase in compliant Large & International taxpayers

2) % increase in Offshore declarations.

3) % increase in transfer pricing audit referrals and prosecutions

4) % increase in withholding tax revenue.

LARGE & INTERNATIONAL CUSTOMERS AT A GLANCE

COMPLIANCE STRATEGY: LARGE & INTERNATIONAL

Population by Tax Type & District

LbsLtkaSuvaForm Type

368115Company

001Business

010Partnership

Of which the VAT and Trade registrants

186VAT

40 CustomsTraders

Based on 2018 registration &Receipts data

Top 10 L&I Customers by Industry Revenue Contribution

27%

32%33% 48%

46% 11%


STRATEGY OVERVIEWThe tourism industry is one of the largest source of foreign exchange earner and has significantly contributed towards the revenue growth of Fiji’s economy. However, with the increasing growth of the sector, there is a substantial risk of revenue leakages. Aggressive tax planning techniques have been employed by many taxpayers for the purpose of financial reporting. Foreign owned entities have been identified to be engaging in these tax planning methods. Fiji is providing lucrative incentives such as Tax Holiday, Tourist Vat Refund Scheme and concessions. These require more effective monitoring given the threat of the incentives to be abused.


• Home stays, private home stays and ancillary taxable activities not being registered for required tax types.

• Understating of income and overstating expenses and abuse of tax and customs concessions.

• Failure to withhold, report and remit withholding taxes – PAYE, PT, Royalty etc.

• Offshore bookings (e-ticketing/ internet) income are not declared.

• Breach of intercompany transaction and leaseback arrangements.

• Overstating Customs Valuation to increase VAT refunds and depreciation expenses.

• Proposal for a legislative provision to require registration of short-stay rental properties and monitoring registration and monitoring of VMS.

• Partnership with Tourism Fiji to extract list of licensed tour operators also working with Tourism regulators to identify illegal operators.

• Engage Service Workers Association on tax matters, Scrutiny of records for sub-contractors at major resorts.

• Concession monitoring of project at major resorts.• Project on hotel package offers for tax obligations and

advisory• Concession monitoring project at major resorts.• Research project on hotel package offers.


1) % increase in registration 2) % increase in Provisional Taxes

3) decrease in revenue leakages

4) % increase in compliance levels

INDUSTRY AT A GLANCE

COMPLIANCE STRATEGY: TOURISM

Population by Tax Type

Form Type Population

Business 1,355

Company 850

Trust & Estate 98

Partnership 131

Traders 508

Total 2,461

Of which the VAT and Trade registrants:

VAT 1,451

Customs Traders 508

*Based on 2018 registration & Receipts data

Population by District

Revenue Contribution

9%6% 11% 66% 69% 5%


Strategy 2019-2021

STRATEGY OVERVIEWThe Construction industry is one of the emerging industries in Fiji. There is a major risk in registration, filing and payment for contractors and sub-contractors. FRCS is constantly requesting data from third parties for big projects to identify contractors involved. This is primarily accomplished by the Inspection Team whilst on site visit to various construction sites. The Inspection team has also designed a specific checklist only for construction companies for data capture. The medium risk customers in this sector are given compliance letters to deter them from falling into the higher risk category.


• Non- registration of contractors and sub-contractors. Sub – contractors and contractors not registering their business in order to maintain the competitive advantage in the market.

• Plumbers and electrical contractors who operate illegally without any proper practicing license from WAF and EFL.

• Contractors earning above VAT threshold of $100,000 and not registered for VAT.

• Over-statement of expenses in the Profit & Loss Statements.• Fly by night businesses.• Improper record keeping leads to defaults in filing and

payment.• Foreigners working in Fiji on work permits without filing of

tax returns.

• Non registration of contractors and sub-contractors will be prioritized in the Phase 3 roll out of VMS.

• Discussions to be put in place with CIC and dialog between large and small contractors to target the issues facing the industry and way forward.

• Interface with the Department of Immigration to track those foreigners who are entering the country with work permits.

• Site visits to be done on construction sites.• Media publications/ public notices for compliance

of unlicensed operators/ non – registrants.


1) % increase in Registration 2) % increase in lodgment 3) % increase in IT & VAT 4) % increase in Provisional tax


COMPLIANCE STRATEGY: CONSTRUCTION INDUSTRY


Form Type Quantity

Business 3,148

Company 1,052

Partnership 214

Trust & Estate

7


VAT 1,176

Customs Traders

534





STRATEGY OVERVIEWThe Transport sector is a key enabler of economic growth and transition in the region. By providing the physical networks and services upon which the economy and society depends for the movement of people and goods, transport increases the access of businesses and consumers to markets and services. Even though this sector contributes 8% revenue of the total revenue collected, they are directly linked to all other sectors. Therefore, it is very important to minimize risk of revenue leakages. Major risk identified are registration, filing, payment and reporting. Further strategies have been identified to manage the risk identified.


• Illegal operation by unregistered customers.• Unreported income from leasing arrangements.• Non-resident PSV permit holders lodging as

resident.• Abuse of concession on fuels and spare parts.• Classification of vatable output as zero rated.• Depreciation claims not legitimate.• Manipulation of FBT and VAT output adjustments.• Failure to withhold, report and remit withholding

taxes – PAYE, PT, Royalty, etc.• Departure Tax, ticket reissue/cancellation –

under declaration.• Foreign charter vessels duty and tax evasion.

• Media publications, TAX TALK articles to target non-compliant transport providers/ illegal operators.

• Data matching project – referral of cases for investigation for non-resident permit holders lodging as resident taxpayers.

• Monitoring of concession on fuels and spare parts.• VMS/EFD to be applicable on charter services. • Audits to be done on FBT, VAT output adjustments, WHT and

PAYE.• Reconciliation of tickets for Departure Tax, ticket reissue/

cancellation.• Tax & Customs data matching and remittance analysis for

customer profiling• Awareness on valuation guidelines.


1) % increase in registered operators

2) % increase in filing 3) % increase in WHT and PAYE collections

4) % increase in registration of VMS


COMPLIANCE STRATEGY: TRANSPORT INDUSTRY


Form Type Registered

Business 7,447

Partnership 240

Trust & Estate 61

Company 786


VAT 1,279

Customs Traders

1,005




3% 14% 19% 1% 7% 7%


Strategy 2019-2021

STRATEGY OVERVIEWValue Added Tax (VAT) is a tax on spending that is levied on the supply of goods and services in Fiji at the rate of 9%, with effect from 1 January, 2016. The VAT Act requires most businesses and organizations of gross turnover of more than $100,000 to be registered for VAT. However, registration is still a huge risk for FRCS. Introduction of the Vat Monitoring System(VMS) is to have efficient and reliable software to encourage voluntary tax compliance and at the same time collect the much needed revenue for the Government which is currently being evaded.


• Inflated refund claims – creation of fake invoices and making of personal claims.

• Taxpayers paying enough to just stay off the raider.• Non-registered taxpayers charging and collecting VAT

(issuing tax invoices).• Inconsistent interpretation of Law.• Under reported sales – not declaring full VAT sales.• Fictitious Traders – shelf companies, fake export invoices/

customs entries.• Domestic sales disguised as exports.• Traders earning above $100,000 turnover not registered

for VAT.• Credit claimed for invoices from unregistered suppliers.• Registered customers collecting VAT but not lodging VAT

returns.• Continuous VAT Refunds being claimed.• New Dwelling houses (NDH) – contractors not lodging

returns and issuing tax invoices.• Non - compliance to EFD regulation.• Issue of manual receipts for VSDC when internet is down

and not updating when internet is back.

• Media publication, TAX TALK articles and SIGs to be published to target non- compliant VAT taxpayers, VAT obligations and registrations.

• Increase site checks to validate VAT registrations.• NTIS will have compulsory requirement for

reporting of input schedules• Matching of trade data to compare Customs & VAT

declarations. • VMS data analysis to identify credits claimed on

exempt supplies. • VAT registration checks for credit claimed for

invoices from unregistered suppliers.• Regular referrals for prosecution for customers

collecting VAT but not lodging returns. • Onsite inspections regularly done to identify non-

compliant EFD regulators. Also to initiate Customer Compliance Awards as a system to reward taxpayers to be compliant.

• Regular compliance checks and monitoring to be done on issuance of manual receipts.

• Audits to be done on non-compliant VAT taxpayers.


1) % increase in customer satisfaction

2) % increase in on-time filing

3) % increase in customers using E-Services.

4) % increase in use of MySay / MyInfo portals

VAT AT A GLANCE

COMPLIANCE STRATEGY: VALUE ADDED TAX

Registration by TaxType

Form Type Total

Company 8,035

Business 6,479

Partnership 901

Trust & Estate

160

Total 15,575


Registration by District VAT Revenue 2018

Tax Type Total Rev.($m)

Import VAT 519.1

Domestic VAT

513.6

Govt. VAT 15.8



STRATEGY OVERVIEWAn effective Border Control is an assurance to all Fijians to live in a secure and safe Fiji. Border Officers endeavor all challenges against illicit travel and trade to secure Government revenue & facilitate legitimate flow of crafts, people and cargo. Border Officers timely intervention to protect Government in its aim towards effective monitoring for prohibited and restricted goods. With the collaboration from LEAs and other regional and International border agencies provides Fiji to also assure a safe and secure trade hub for the Pacific.


• Illicit drugs and precursors.

• Money Laundering and Terrorist Financing.

• Security [Terrorism, proliferation of weapons and materials of mass destruction, trafficking of small arms and explosives, and illicit diversion of dual use goods]

• IPR, Health and Safety Programme

• Environmental crime.• Revenue Fraud.

• Use of Non-Intrusive Inspection Equipment, Fiji Drug Detector Dog Program, Ion Scan and First Defender at Ports of Entry, Direct intervention by boarding all vessels upon entry into Fiji, Collaboration with Local and International LEAs.

• Working with Fiji Pharmaceutical Service for trade against fake medicine.• Working with WTO & WCO principles to circumvent illicit trade.• Partnership with traders to identify IPR breaches and assist approved traders.• Identify and account all dutiable goods passing through our borders.• Working with other border agencies and regional and international bodies.• Working with FFIU and AML (Anti – Money Laundering & Fiji Police Force).• Preparation of a Counter Terrorism Strategy for FRCS that shall be incorporated

with the National Counter Terrorism Strategy.• Implementation of actions against the trade of Small Arms and Light Weapons

[SALW].• Development of Strategic Trade Control Enforcement (STCE) processes and

procedures with guidance from WCO.


1) % decrease in money laundering and terrorist financing

2) % increase in enforcement and security measures

3) % decrease in environmental crime

4) % decrease in illicit drugs and precursors

BORDER AT A GLANCE

COMPLIANCE STRATEGY: BORDER SECURITY

Fiji Drug Detector Dog Unit

Description # of Intervention

Origin

Meth 12 USA

Marijuana Rolls

1 USA

Synthetic Cannabis

1 USA

Total 14

Border Interactions

Description 2017 2018

Volume of Cargo (MT)

8,841 11,576

Number of passengers

982,800 1,015,234

No. of Aircrafts

25,115 24,618

No. of Ships 1,587 2,386

Border Interventions

Description 2017 2018

Total no. of interventions

84,061 222,462

Total no. of interceptions

3226 15449

No. of inter-vention %

4% 7%


Strategy 2019-2021

STRATEGY OVERVIEWThe “Customs in the 21st Century” strategy document confirms the role of Customs to: “Control the movement of goods and thereby secure the state’s interests and safeguard revenue collection. The key aims have been to ensure compliance with state policies and laws applicable to the cross-border movement of goods, to combat smuggling, and to secure borders, whilst ensuring the facilitation of legitimate trade.”


• Leakage from the bonded warehouse.• Goods nearing expiry not cleared

within 6 months.• Abuse of concessions and

Misdecsription of goods.• Issuing of incorrect tariff classification

opinions based on the incomplete information submitted by the importer/trader/customs agent

• Making of false invoices and declaration of incorrect values.

• Leased goods which are incorrectly cleared for home consumption using code IM4.

• Continuous monitoring and spot checks of the bonded warehouse to identify loopholes for leakages.

• Reminder letters issued to operators who have goods nearing their expiry in the warehouse and for leased goods.

• Penalties to be imposed for abuse of concession codes.• Publication of Advanced Rulings to focus on the classification and

valuation of goods as well as the Rules of Origin. • Increased level of scrutiny on the classification codes that are

frequently used incorrectly. Identifying and revoking license of brokers known to be non- compliant.

• Valuation database and Tax clearance verification for false invoicing, incorrect vales and goods clearance.

• Media publications/ Tax Talk articles on issues such as statistics of non-compliant warehouse operators, Misdecsription of goods, leased goods, goods nearing expiry.


1) % increase in Customs revenue

2) % increase in prosecution for abuse of concession codes

3) % decrease in leakages from warehouse

4) % decrease in misclassification and Misdecsription of goods

CUSTOMS REVENUE AT A GLANCE

COMPLIANCE STRATEGY: CUSTOMS REVENUE

Licensed Stakeholders

Agents Suva Lautoka Nadi Total

Customs House Agent 33 27 27 87

Manifest Agent 23 11 20 54

Airline Agent 0 0 1 1

Cargo freight station 16 9 2 27

Bonded Warehouse 63 18 15 96

Licensed Stakeholders

Infringement Lautoka Nadi Suva

Concession code not Applicable 8 10 45

Incorrect Description & Marks 5 11 46

Incorrect Freight 22 15 19

Incorrect Tariff Classification 46 33 102

Incorrect Exchange rate 21 18 29

Incorrect VFD 40 19 30

Other 1 0 61

Total 143 106 332


STRATEGY OVERVIEWAll categories of compliance risk are a concern. The significant compliance risk in the Customs is duty evasion. To deal with this risk, a lot of initiative will be put into awareness and training of traders and agents. A comprehensive approach will be prioritized to curb the mentioned risk. In addition, our services will be strengthened (e.g. Public Notices, Talk Tax, Brochures, Public Daily’s and Social Media Releases), internal capabilities enhanced and bilateral data exchange agreements pursued. We will proactively refer cases for criminal prosecution.


• Common culture of non – compliance amongst some brokers & traders.

• Fraudulent intent to evade duties and taxes.• Significant lack of classification knowledge in the

community.• Intentional misclassification by traders and clearing

agents.• Significant rise in profit shifting and trade-based

money laundering amongst related party companies.

• Targeted profiling of non-compliance traders and brokers

• Invest in advanced data analytics software, co-operation with other agencies for data exchange.

• More taxpayer engagements to bridge the knowledge gap in the community through partnership approach.

• Analyze patterns and behavior of traders; public pressure on brokers to improve behavior, prosecution, TAX TALK articles.

• Increase in integrated Audits and Investigations.


1) % increase in Customs Collection

2) % increase in prosecution cases

3) % decrease in tax and duty evasions

4) % increase in integrated Audits

CUSTOMS COMPLIANCE AT A GLANCE

COMPLIANCE STRATEGY: CUSTOMS COMPLIANCE

Offences

Customs

Compliance &

Investigation

Collection


Strategy 2019-2021

Ph: +679 3243613

Email: [email protected]

www.frcs.org.fj

ACRONYMS / ABBREVIATIONS

ASYCUDA Automated System for Customs Data

CEC Customer Enquiry Centre

CIS Compliance Improvement Strategies

EMS Employer Monthly Summary

EFD Electronic Fiscal Device

FFIU Fiji Financial Intelligence Unit

FITS Fiji Integrated Tax System

FNPF Fiji National Provident Fund

FRCS Fiji Revenue & Customs Service

HWIs High Wealth Individuals

ICI Intelligence Compliance & Investigation

IMF International Monetary Fund

LEU Lodgment Enforcement Unit

LTA Land Transport Authority

MOU Memorandum of Understanding

MOH Ministry of Health

NTIS New Tax Information System

PAYE Pay As You Earn

RAFIT Risk Assessment & Financial Intelligence Team

REALB Real Estate Licensing Board

TCC Tax Compliance Certificate

WCO World Customs Organization

CONTACT DETAILS


Documents

COMPLIANCE IMPROVEMENT STRATEGY 2019-2021 COMPANY …€¦ · stakeholder engagement, legislative changes, taxpayer education and increased public awareness. REVENUE PERFORMANCE There