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Compliance Segments

RISK AREAS TO FOCUS

FRCS generally believes most of our customers are compliant. Risks are usually associated with customers who avoid or evade tax. For such entities, we have designed compliance segments where FRCS will focus on ensuring these customers voluntarily comply. If certain customers do not comply, we have relevant treatments to address these issues.

STRATEGY OVERVIEW

FRCS takes pride in providing exceptional customer service while ensuring full compliance with all applicable tax regulations. Our commitment to both superior customer service and strict tax and customs compliance means that clients can trust us to handle their needs with the utmost care and professionalism. We understand that tax compliance is a critical concern for our customers, and we strive to exceed their expectations by delivering top-notch customer service while always adhering to the latest tax laws.

When working with us, customers can be confident that our dedicated team will go above and beyond to provide exceptional customer service and maintain the highest standards of tax compliance. Our customer service team is well-versed in tax and customs compliance issues, and we are committed to delivering personalized service that meets the unique needs of each customer. To further support our customer service teams in attaining success, we have implemented the New Tax Information System (NTIS), which enhances workflow efficiency and simplifies our ability to deliver valuable service and solutions to our customers.

 

Compliance Areas That Continue To Receive Attention

Some tax risks in customer service include late filing of returns, customers operating small businesses but registered as Salary & Wage Earners, and customers not declaring full income, particularly those operating via digital platforms.

To mitigate these risks, the tax authority can identify entities with a tendency to file late returns and provide more awareness and education. FRCS will encourage the use of easier and more efficient online payment methods, offer online lodgement of returns via the TPOS portal for convenience and timesaving, advise customers to declare all their worldwide income while lodging their tax returns, and assist customers who may not be aware of their obligations in any way possible.

Additionally, post-COVID, FRCS is working closely with customers to help in addressing compliance issues in customer service.

STRATEGY OVERVIEW

Small and Medium Enterprises (SMEs) are on the rise and refer to businesses that earn less than $500,000 annually. To support and enhance the growth of SMEs, the Fiji Government provides various incentives and has set up an MSME Support Centre at FRCS that offers free advisory services on tax and customs-related matters. However, as the number of SMEs increases, FRCS must address several compliance risks by implementing risk-mitigation strategies.


Compliance Areas to Focus

Some common risks associated with tax compliance in businesses include misconceptions about tax payment requirements, under declaration of income by businesses that operate on a cash basis, and lack of compliance by businesses that fall below the Income Tax threshold.

To address these risks, FRCS will create awareness to businesses about the Income Tax threshold and exemptions. Businesses will be encouraged to issue receipts and declare their income accurately to ensure full compliance with tax regulations. Monitoring the compliance behavior of businesses initially and taking proactive measures will help prevent potential issues.

Working with industry associations to support their members in becoming tax compliant will also be beneficial. By collaborating with these associations, the tax authority will provide guidance and assistance to businesses in meeting their tax obligations, which will ultimately lead to improved compliance rates.

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In Fiji, there is a Income Tax threshold of $30,000 where sole traders and salary & wage earners are exempt from paying tax. For a sole trader, if your net profit after taxable expenses is below $30,000, you do not pay any Income Tax.

 

A summary of the SME customer population is below:

Type

Number of Taxpayers

Criteria

Micro

107,585

Less than $50,000 Total Sales

Small

5,523

Between $50,000 - $300,000 Total Sales

Medium

2,798

Greater than $300,000 - $1,250,000 Total Sales

Grand Total

115,906

 

 

SME Focus Sectors


Agriculture Sector

Agricultural income can be difficult to track, and some customers may not accurately report their income, leading to underpayment of taxes. Additionally, some customers may fail to register for tax purposes, either due to lack of awareness or deliberately, leading to non-compliance with tax regulations. Even if customers are registered, they fail to file their returns on time, resulting in penalties.

To address these tax compliance risks, FRCS will take various service and enforcement measures. Education and awareness will be increased by organizing workshops and training sessions for customers to increase their understanding of tax regulations and the consequences of non-compliance. FRCS has simplified  tax procedures for the agriculture sector, such as by introducing online registration and filing systems and reducing the administrative burden.

FRCS will carry out regular audits and investigations to detect non-compliance, such as underreporting of income and non-filing of returns. Collaboration with other agencies, such as Ministry of Agriculture, can ensure that customers are registered and compliant with tax regulations. Moreover, penalties and incentives will be utilized to encourage compliance.

Overall, the agriculture sector faces significant tax compliance risks that will be mitigated through a combination of service and enforcement measures. By working collaboratively with other agencies, simplifying tax procedures, and offering incentives for compliance, FRCS will ensure that customers are registered and compliant with tax regulations, ultimately contributing to a more stable and equitable economy.

 

Wholesale & Retail Sector

The Wholesale & Retail sector faces various risks that can negatively affect its economic sustainability, including unregistered online retailers, excessive pricing and inaccurate sales declarations by liquor license holders in rural areas, marked-up cigarette prices in rural areas, double invoicing, overstating expenses, and failing to issue receipts.

To mitigate these risks, several treatments will be implemented. FRCS will conduct awareness sessions on tax obligations for retailers in rural areas, collaborate with the Liquor Licensing Board to make the Tax Compliance Certificate a mandatory document for license renewal, analyze customs trade data, and interview customers who import large amounts of goods but are not filing tax returns. Site visitations will also be conducted to check whether depreciation expenses claimed are correct. Proper advice and guidance will be provided to customers to correct their returns if there are anomalies.

By implementing these treatments, the Wholesale & Retail sector will improve compliance with tax regulations, minimize the risk of underpayment of taxes, and promote economic sustainability.

  

Medical Practitioners

Medical practitioners who operate private services using cash payment methods are exposed to various risks that relate to financial transparency, expenses claiming, and record-keeping.

To alleviate these risks, a number of treatments can be employed. For instance, the Fiji Medical Board and FRCS can collaborate to establish Tax Compliance Certificate as a mandatory requirement for medical practitioners to be granted operating licenses. This requirement could be reviewed annually to ensure its continued effectiveness. Additionally, private practitioners need to be educated on their tax obligations and the significance of maintaining accurate records of their income and expenses.

To enhance efficiency in handling such issues, there should be an improved collaboration between the Ministry of Health and private practitioners. Identification and monitoring of private medical practitioners who operate on a cash basis is also crucial in ensuring compliance with tax and financial regulations. Moreover, creating a comprehensive list of private doctors from hospitals and specialists can facilitate better regulation and monitoring of private medical practices.

Implementing these treatments will help to mitigate the risks associated with private medical practices and ensure that medical practitioners provide their services in an accountable, ethical, and compliant manner, which ultimately benefits both the practitioners and FRCS.

 

Other Service Activities

Other Services includes a number of customers who are involved in:

  • Hairdressing and Beauty Salons
  • Funeral and related activities
  • Repairs of computers, communication equipment, consumer electronics, footwear, leather goods, furniture and household appliances
  • Other personal service activities

Some of the customers in these sectors operate on a cash basis and income is not declared accurately to FRCS. There are no receipts issued to their customers and proper records are not kept for verification purposes. Furthermore, other taxable expenses are inflated such as depreciation, wages and cost of goods sold.

FRCS will conduct random site inspections on these businesses and provide awareness on such issues. Advise will be provided on our TPOS and tax types to be registered. Their business process will  be studied and proper advise will be given on how to keep records for future verification purposes.

STRATEGY OVERVIEW

FRCS will improve the VAT compliance by implementing a comprehensive improvement plan that focuses on education, administration, penalties, and collaboration. This includes educating customers about their VAT obligations, strengthening VAT administration through regular audits and improved technology systems, enforcing strict penalties for non-compliance, establishing a dedicated VAT desk audit team and improving collaboration with other government agencies and stakeholders. The current simplification of the VAT act will play a crucial role in improving VAT compliance by reducing complexity in registration, filing, reporting processes and introducing clear guidelines for customers.

Another critical aspect that FRCS will consider is the taxation of the digital economy. FRCS will develop a strategy to ensure that businesses operating in the digital economy comply with VAT regulations, including implementing VAT on digital services, identifying non-compliant businesses, and enforcing penalties for non-compliance. By including the digital economy in the VAT compliance improvement plan, FRCS will ensure that we collect the appropriate amount of VAT from this growing sector and maintain a level playing field for all businesses, both digital and non-digital.

 

Compliance Areas to Focus

VAT risks are common among customers in Fiji, where some pay only enough to avoid being detected by the system, despite their low payables being insufficient to operate the business after paying for Vatable expenses. Other risks include customers claiming VAT refunds without having any zero-rated supplies or capital expenditures, charging and collecting VAT via VIP invoices despite not being registered for VAT, underreporting of VAT sales, fictitious traders, and fake export invoices or customs entries. Customers whose sales exceed $100,000 FJD but are not registered for VAT are also a significant risk. To evade VAT, some customers underreport business operations and do not claim all Vatable expenses. VAT refunds are also an issue while conducting First VAT Refund audits. Improper records kept by customers, incorrect invoice numbers, and duplicate invoices are also among the risks.

To mitigate these risks, FRCS conducts in-depth audits of customers by analyzing customs trade data with Income Tax Sales and VAT. Site inspections are also conducted to verify certain expenses claimed. Awareness sessions are conducted with various parties to educate them about the risks and consequences of tax evasion. FRCS encourages VAT registered customers not to avoid or evade VAT as they are agents for the government in collecting VAT. FRCS is also implementing NTIS Risk Engines and VMS to assist in mitigating the risks.

It is mandatory for entities in Fiji whose total turnover is or more than $100,000 to register for VAT. FRCS is currently in process of VAT rewrite to simplify the VAT administration process. Furthermore, by designing a VAT Toolkit, FRCS will promote a ‘right from the start’ attitude by customers.

The risk engine in the new tax system will check on filing, reporting and payments non-compliance. Therefore, customers should keep proper records and declare all correct Vatable income and expenditure to avoid any issues with VAT obligations. The government is committed to ensuring tax compliance, and customers are advised to follow the regulations to avoid any penalties or legal consequences.

Customers may refer to the VAT Guide for further information on VAT. 

STRATEGY OVERVIEW

In the current dynamic era of Customs operations, new threats continue to emerge, making Customs compliance crucial for Fiji's economic stability. Compliance risks such as Customs valuation, import and export restrictions, tariff classification, trade agreements, and documentation and record-keeping pose a significant challenge. To address these risks, customs will work closely with key stakeholders and global partners to improve voluntary compliance.

Specific Risks in Customs Imports & Exports

Customs exports and imports in Fiji are associated with various compliance risks, including Customs valuation, import and export restrictions, tariff classification, trade agreements, and documentation and record-keeping. Non-compliance with these regulations can result in penalties, fines, and shipment delays. Incorrect valuation, tariff classification, and record-keeping can lead to significant financial losses and damage to a trader's reputation. To mitigate these risks, traders must have a thorough understanding of Fiji's customs regulations and work closely with Customs brokers and freight forwarders.

Maintaining accurate and complete documentation is crucial to ensure compliance with Customs regulations. Failure to comply with Customs regulations leads to significant financial losses and damage to a trader's reputation. Therefore, it is essential for traders to have a comprehensive understanding of Customs compliance in Fiji and maintain a robust compliance program. It is also important to note that some traders intentionally misclassify items to reduce or avoid paying duties, while others abuse concessions and incentives to avoid paying duties. This non-compliance culture among some brokers and traders leads to leakage in revenue, which needs to be addressed.

To address the compliance risks associated with Customs exports and imports in Fiji, FRCS has developed a multi-pronged approach to promote Customs compliance and reduce the culture of non-compliance among brokers and traders. FRCS will create more awareness among customers regarding Customs requirements for imports and exports. This will bridge the knowledge gap and raise awareness of relevant duties and taxes payable. For high-risk customers, FRCS will target profiling of non-compliant traders and brokers and strengthen its Customs Profiling Committee by reviewing profiles into ASYCUDA World System and Cargo Targeting System.

FRCS will also invest in advanced data analytics software and cooperate with other agencies for data exchange to analyze patterns and behavior of traders for further analysis. This will determine whether customers need more awareness or need to be profiled. Continuous monitoring and spot checks of the bonded warehouse will be conducted to identify loopholes. Reminder letters will be issued to operators with warehouse goods nearing their expiry to clear them within six months. The Advanced Rulings will also be publicized to focus on the classification and valuation of goods, as well as the Rules of Origin. These measures will help FRCS to promote customs compliance and reduce the culture of non-compliance among brokers and traders.

STRATEGY OVERVIEW

Given Fiji's strategic geographic location in the Pacific, its air and sea borders are of critical importance for both the facilitation of legitimate trade and travel and the prevention of illicit activities such as drug trafficking, money laundering, and the trafficking of small arms and explosives. With the increasing trend of Fiji becoming a transit hub, border security risks are becoming more diverse and sophisticated. To mitigate these risks, the Fiji Revenue and Customs Service (FRCS) is committed to working with other agencies and utilizing modern methods of border protection.

To ensure effective border security, the FRCS is constantly upgrading the training of its staff and implementing advanced technology and equipment at air and sea ports. The FRCS also collaborates with other agencies such as the Fiji Police Force and the Fiji Military to improve intelligence gathering and sharing, and enhance coordination in border management. This approach allows for the quick detection of illicit activities and the prevention of threats to national security, while also facilitating the smooth flow of legitimate trade and travel.

As a transit hub, Fiji faces additional challenges in border security. To address these risks, the FRCS is expanding its cooperation with international partners, particularly in the areas of information exchange and joint operations. This approach allows for the identification and tracking of high-risk cargo and passengers, and helps to prevent the smuggling of illicit goods into Fiji. By implementing these measures, the FRCS aims to enhance the security and integrity of Fiji's air and sea borders, while promoting economic growth and development through legitimate trade and travel.

Compliance Focus Areas

The border security sector faces significant criminal risks, including drug smuggling, money laundering, trafficking of small arms, and explosives. To combat these risks, the Fiji Revenue and Customs Service (FRCS) will collaborate with the Fiji Police Force to address such cases.

FRCS has identified the prevalence of illicit drugs and precursors entering Fiji through its borders. Additionally, money laundering has been identified as a critical issue linked to transfer pricing. To address these issues, FRCS will work closely with the Fiji Financial Intelligence Unit (FFIU) and Anti-Money Laundering (AML) to capture these types of transactions.

FRCS recognizes the importance of a Counter Terrorism Strategy and will incorporate it into the National Counter Terrorism Strategy to combat the proliferation of weapons/materials of mass destruction, trafficking of small arms and explosives, and illicit diversion of dual-use goods. Collaboration with other border agencies, regional, and international bodies will be essential to detect illicit drugs, precursors, and chemicals.

To enhance border security, FRCS will deploy Non-Intrusive Inspection Equipment, Ion Scan, and First Defender at Ports of Entry. Additionally, all vessels entering Fiji will undergo a risk assessment for intervention, and FRCS will collaborate with local and international agencies to detect criminal activities.

Overall, FRCS is committed to mitigating risks associated with border security and implementing strategies to detect and address criminal activities effectively. Collaboration with relevant stakeholders, deployment of advanced equipment, and preparation of robust counter-terrorism strategies will be essential to maintain border security and facilitate legitimate trade and travel.

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