MFED Annual Report 2015.Pdf

MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT

ANNUAL REPORT 2015

PO Box 67 Bairiki, Tarawa, Kiribati Telephone 686 21806.

Website: www.mfed.gov.ki

Table of Contents Acronyms ...... 3 Minister’s Introduction ...... 4 Secretary’s Overview ...... 5 Vision and Mission ...... 6 Vision ...... 6 Mission ...... 6 About the Ministry of Finance and Economic Development ...... 6 Role and main functions...... 6 Our priorities ...... 7 Our legislation ...... 7 Organisational structure ...... 7 Governance ...... 10 Our stakeholders ...... 10 Our critical issues ...... 11 Accountant General’s Report ...... 12 Consolidated Fund Recurrent Revenue and Expenditure ...... 12 Income for MFED ...... 14 Expenditure for MFED ...... 15 Comparison of actual MFED financial results with 2015 Budget ...... 16 Kiribati National Statistical Office ...... 18 Internal Audit ...... 20 Accounting and Financial Services...... 20 Corporate Services ...... 21 Information Technology ...... 21 National Economic Planning Office ...... 22 Kiribati Customs Services ...... 28 Taxation ...... 29 Kiribati Fiduciary Services Unit (KFSU) ...... 29

List of Tables Figure 1: Monthly Website Hits, MFED 2015 20 ...... Error! Bookmark not defined. Figure 2: Revenue Equalisation Reserve Fund, Kiribati, 1984 to 2014 21Error! Bookmark not defined. Figure 3: Annual Debt Payments, Kiribati, 2014 to 2043 22. Error! Bookmark not defined. Table 1: MFED Establishment, 2014 and 2015 ...... 8 Table 2: Government Recurrent Revenue by Source, 2015 ...... 13 Table 3: Government Recurrent Expenditure by Source in 2015 ...... 14 Table 5: Expenditure by Divisions of MFED, 2015 ...... 16 Table 6: Expenditure for MFED Divisions against Budget, 2015 ...... 17 Table 7: Revenue for MFED Divisions against Budget, 2015 ...... 17 Table 8: Expenditure by Type against Budget, MFED, 2015 ...... 18 Table 9: In-Service Training of Staff, MFED, 2015 ...... 21

List of Figures Figure 1: Monthly Website Hits, MFED 2015 ...... 22 Figure 2: Revenue Equalisation Reserve Fund, Kiribati, 1986 to 2015 ...... 24 Figure 3: Value of Total Debt, Kiribati, 2015 to 2043 ...... 25 Figure 4: Annual Debt Payments, Kiribati, 2014 to 2043 ...... 25

Acronyms

EEZ Exclusive Economic Zone EU European Union GoK Government of Kiribati IMF International Monetary Fund IT Information Technology KCS Kiribati Customs Service KDP Kiribati Development Plan KFSU Kiribati Fiduciary Services Unit KNSO Kiribati National Statistics Office KPF Kiribati Provident Fund MCIC Ministry of Commerce, Industry and Cooperatives MCTTD Ministry of Communications, Transport and Tourism Development MELAD Ministry of Environment, Land and Agricultural Development MFED Ministry of Finance and Economic Development MPWU Ministry of Public Works and Utilities NEPO National Economic Planning Office NSO National Statistics Office Paris21 Partnership in Statistics for Development in the 21st Century PFTAC Pacific Financial Technical Assistance Centre RERF Revenue Equalisation Reserve Fund RAA Revenue Administration Act SOE State Owned Enterprise SPC Secretariat of the Pacific Community SPFM Strengthening Public Financial Management TIN Taxpayer Identification Number VAT Value Added Tax

All currency in this report is expressed in Australian dollars.

Minister’s Introduction

This is the 2015 Annual Report of the Ministry of Finance and Economic Development. 2015 was a year of consolidation of the major reforms that were carried out in 2014, particularly those in taxation reform with the introduction of the VAT and Excise Tax and the abolition of Customs Duties as well as the continued reforms of State Owned Enterprises. Revenue records were broken both in terms of taxation revenue and the revenue from fishing license fees which allowed the Government of Kiribati to post its third annual surplus in a row. The strategies undertaken by the Ministry are based on the Ministry of Finance and Economic Development Strategic Plan 2012–15. In 2015, the Government has maintained a fiscal policy of prudent expenditure, low inflation, real economic growth and improvements in the lives of all I-Kiribati. As well, a record surplus was posted in 2015.

This Annual Report supports the Ministry’s desire to provide the public information on our activities in 2015 to enhance accountability and transparency within Government. I would like to extend my appreciation to all staff who have contributed to the work of the Ministry in the past year and to all Divisions for their input to this report.

Hon Teuea Toatu Minister of Finance and Economic Development 2016

Secretary’s Overview

It is my pleasure to present the Annual Report of the Ministry of Finance and Economic Development for the calendar year 2015.

I would like to extend my appreciation to those donors who have made contributions to the economic reforms undertaken in 2015, in particular the World Bank, the IMF, Australia, New Zealand, the ADB and the EU. The Pacific Financial Technical Assistance Centre (PFTAC) has provided its usual high level of assistance with financial management, advice on taxation and the enhancement of economic statistics throughout 2015. I would also like to thank other donors who have assisted the Ministry particularly with other projects (the EU) and with statistics (SPC, IMF). One again, the Pacific Regional Infrastructure Facility has assisted with the monitoring of the performance of the largest infrastructure projects and provided valuable support with wider aspects of project monitoring. The Pacific Islands Forum Secretariat has assisted with short-term secondments of three staff to the Ministry of Finance in Samoa to enhance development of the 2016 budget.

This report sets out the achievements of the Ministry in 2015 including:  The bedding down of the VAT and Excise Taxes which commenced in April 2014.  The continuation of budget support from donors including the World Bank and New Zealand which recognised the continuance of economic reforms undertaken by the Government.  New measures undertaken to place State Owned Enterprises on a more commercial footing and the continued work to progress the State Owned Enterprise Reform Act of 2013. The merger of the Copra Mill and the Copra Cooperative Society was one of the major SOE reforms to have been carried out in 2015.  The continuation of the management of the Government’s debt policy reforms which included reporting to Cabinet.  Reforms to the management of the assets of the Revenue Equalisation Reserve Fund.  The work undertaken to produce the new Kiribati Development Plan 2016-19.  The continuing strengthening of public financial management through the availability of enhanced reporting and monitoring of revenue and expenditure.  The production of the 2015 Population Census in November 2015 and continued improvements in economic statistics, particularly Balance of Payments.  A second collaborative report with the Ministry of Fisheries and Marine Resource Development on the revenue collections from fishing license fees for 2015.  A revamp of the Ministry of Finance and Economic Development website.

Eriati Manaima Secretary Ministry of Finance and Economic Development

Vision and Mission

Vision The vision of MFED is a nation where stable economic development promotes well-being for I- Kiribati through sound financial and economic policy reforms.

Mission The mission of MFED is to enhance sustainable economic growth and financial stability for the welfare of the people of Kiribati through the management of both government and development finances. This is achieved through the provision of appropriate economic and financial management methods and systems, computerized accounting and control systems, tax administration, customs enforcement and provision of accurate and quality national statistical services.

Inclusive economic growth in a sustainable manner is vital for a country such as Kiribati which is heavily dependent upon its marine resources for economic development. Inclusive growth means that all citizens of Kiribati share in the prosperity gained from the implementation of economic reforms. The economic reform program has been important in modernising public financial management and ensuring that government funds are not diverted to uneconomic activities.

The broad sector strategy toward promoting inclusive economic growth and poverty reduction includes the following macro strategies as aligned within the Kiribati Development Plan (KDP) 2012-15:

 Effective structural and fiscal reforms: ensuring the efficiency, effectiveness and sustainability of government finances;

 Expansion and diversification of economic opportunities for poverty reduction through the provision of economic policy advice in a manner that ensures effective allocation of government finances.

 Improved public financial management

 Aid effectiveness and results based management About the Ministry of Finance and Economic Development

Role and main functions MFED being a lead Ministry for the economic growth and poverty reduction sector has significant contributions towards achieving Government policy objectives that are set out in the Kiribati Development Plan (KDP) 2012-2015 as follows:

 As a lead Ministry its main role is to coordinate all efforts from supporting Ministries on the implementation of the KDP.

 More specifically MFED works closely with supporting Ministries in coordinating efforts and inputs on the cross cutting responsibilities reflected in the KDP

Our priorities The main priorities of the Government of Kiribati and MFED in 2015 included working towards improving revenue performance through such measures as bedding down the reforms of the tax system in 2014, specifically the VAT and Excise Tax. Other priorities were continuing the improvements to the management of State Owned Enterprises and the public debt, raising the standards of public financial management, and reforms to the management of the RERF.

Our legislation MFED is the responsible authority for the following Legislative Acts: Public Finance (Control and Audit) Act, Procurement Act, Stores Regulations, Internal Revenue Board Act, Statistics Act, Census Act, Kiribati Provident Fund Act, Kiribati Insurance Act, Development Bank of Kiribati Act, Loans and Borrowing Act, the State Owned Enterprises Act, the Excise Tax Act, Value-Added Tax Act, the Revenue Administration Act and the Anti-Corruption Act.

Organisational structure The Ministry of Finance and Economic Development existing organizational structure embraces 10 key divisions, which are equally contributing and sharing the Ministry responsibilities, namely:

(i) Administrative Services Division (ii) National Economic Planning Office (iii) Accounting Division (iv) Internal Auditing Division (v) Taxation Division (vi) Kiribati Customs Service (vii) Kiribati National Statistics Office (viii) National Authorizing Office (ix) Kiribati Fiduciary Services Unit (playing supportive role) (x) Information Technology Unit (IT)

The total number of staff in the Ministry was unchanged at 170 between 2014 and 2015. There were 166 permanent and 4 Supernumerary positions in 2015. Table 1 shows the establishment by Division.

Table 1: MFED Establishment, 2014 and 2015 Division 2014 2015 Establishment Establishment Corporate Services 22 22 Accounts 51 51 Customs 33 33 Internal Audit 5 5 National Economic Planning Office 14 14 Kiribati National Statistics Office 14 14 Taxation 21 21 IT Services 6 6 Total Permanent Posts 166 166 Supernumerary Positions1 4 4 Total 170 170 Source: PSO

1 In 2014, four Taxation Assessors. 9

The functional Organizational Chart showing the organization of the Ministry’s departments is provided below.

Minister

State- Owned Enterprises Secretary DBK KPF KIC Deputy Secretary

SPECIAL NATIONAL INTERNAL ACCOUNTING CORPORATE NATIONAL KIRIBATI UNITS- STATISTICS AUDIT & FINANCIAL TAXATION INFORMATION SERVICES ECONOMIC CUSTOMS KFSU, OFFICE Senior SERVICES Commissioner TECHNOLOGY Assistant PLANNING SERVICES NAO Republic Internal Accountant of Taxation Secretary OFFICE Comptroller IT Manager Director Statistician Auditor General Director of Customs

Governance The Senior Management Team comprising of divisional heads is responsible for the Performance Monitoring of the achievements of the Ministry Strategic Plan. In its weekly meetings, the Team monitors the progress of achievements. Each division provides a report of its progress at these meetings.

The Internal Revenue Board which includes the Secretary, Deputy Secretary, Secretary of the Public Service Office, Comptroller of Customs, Taxation Commissioner, Director of the National Economic Planning Office and Secretary for Commerce, Industry and Cooperatives sat monthly in 2014. The board monitored taxation and customs revenue against the budget throughout the year, made recommendations on the introduction of the VAT, and made decisions on unrecoverable outstanding taxes.

The Revenue Equalisation Reserve Fund (RERF) Investment Committee met 6 times during 2014 to discuss matters relating to the investments of the RERF. The Committee consists of the Minister for Finance and Economic Development (Chair), the Secretary to Cabinet, the Secretary of MFED, the Deputy Secretary of MFED, the Accountant General, the Director of NEPO, and two members from the private sector.

The SOE Reform Steering Committee was set up to progress the Government’s SOE reform agenda in Kiribati. The Committee comprises the Secretary of Cabinet, Secretaries of MFED, MCIC, MPWU, MCTTD, MELAD, and a representative from the Attorney General’s Office. The Committee met more than once a month throughout 2014 depending on the urgency of issues raised.

Our stakeholders MFED advises and supports the Cabinet on fiscal and economic policy. For all Government agencies, other levels of Government and statutory bodies, MFED provides advice and support on strategic planning, budget management, public finance, legislation and project monitoring and evaluation.

MFED has been incorporating the broad government strategy of encouraging private sector investment through public private partnerships such as the Otintaai Hotel. Some SoEs, such as the Kiribati Supplies Company Limited, have been sold off by the government. However MFED is mandated to oversee the performance of the following Corporations and Government owned enterprises:

Kiribati Provident Fund

The operation of the Kiribati Provident Fund (KPF) is governed by the Kiribati Provident Fund Ordinance. The KPF has substantial capital from employer contributions which is invested.

Kiribati Insurance Corporation

The Kiribati Insurance Corporation business is responsible for insurance business in Kiribati.

Development Bank of Kiribati

The operations of the Development Bank of Kiribati are made under the Development Bank of Kiribati Act. The Bank is responsible for providing finance by making loans to any person for the purposes of primary production; or for the establishment, development or acquisition (in whole or in part) of industrial or commercial undertaking and for home financing. In addition, the Bank is to provide advice and assistance with a view to promoting the efficient organization and conduct of primary production or of industrial or commercial undertakings.

ANZ Bank of Kiribati

The Kiribati Government’s share in the ANZ Bank of Kiribati is 25%. The Secretary of MFED is a board member.

Our critical issues The population in Kiribati at the 2010 Population Census was 103,058 with 48.6% of the population in South Tarawa and the rest scattered in the outer islands. The population growth rate was 2.2% for the nation and 4.4% in South Tarawa. The growth in South Tarawa contrasts with the near stagnation in rural population growth of 0.2%. Some outer islands experience rapid population decline (eg 5.7% on Makin) while others such as Teeraina (7.6%) experienced high increases. This growth in South Tarawa is mainly fuelled by migrants from the outer islands seeking better employment opportunities and the benefits of being part of the cash economy rather than a subsistence living. South Tarawa has a doubling rate such that by 2026, in 11 years’ time, its population will have doubled to 100,000 people. The rapid growth in South Tarawa has caused strains on the ability of the Government to provide basic services such as water and sanitation. Roughly two-thirds of the country is two meters above mean sea level. The coral islands are rather infertile so that agricultural production possibilities are limited. Because the islands are low-lying, Kiribati is subject to major natural risks especially with regard to climate change.

Kiribati is one of the most remote group of islands in the Pacific with 32 coral atolls and one raised coral island over an area of 3.5 million sq km. There is a distance of 4,500 km from the east to the west and 1,500 from the north to the south. 24 of the 33 islands are inhabited, many of which are isolated from the capital in South Tarawa. Transportation costs are high and transport services to some islands are intermittent. Because of its isloation and remoteness, issues such as transport and communications are a high priority. Kiribati also has one of the lowest per capita incomes in the Pacific. Kiribati is highly reliant on imports, including foodstuffs and fuel. Key exports are coconut products and fish. The trade deficit in 2014 was 49% of GDP. The significant demand for government resources is also a problem, due to low levels of revenue collection.

The taxation base is very low and therefore revenue raised through personal income taxes and company taxes are also low. Non-compliance with regard to company taxes has been a continuing problem which leads to less than adequate government taxation revenue. Fisheries license fees are the major source of revenue with 78.1% of total government revenue from that source in 2015. However, revenue from fisheries is volatile depending on a range of issues including the international price of tuna, the weather, and the stock of tuna. The Government of Kiribati closed the Phoenix Island Protected Area from commercial fishing from 1 January 2015. This volatility in revenue raises challenges with regard to adequate forecasting of future streams of revenue.

The sovereign wealth fund, the Revenue Equalisation Reserve Fund (RERF), has suffered in the past due to the Global Financial Crisis and drawdowns to support the government deficit. However, in more recent years the RERF has achieved more positive outcomes.

In the recent past there had been significant growth in SOE subsidies which placed pressure on recurrent expenditure for basic services. Improving the commercial management of SOEs, reducing inefficiencies, and increasing the transparency of subsidies were regarded as priority reforms. As a result, the Government has embarked on an ambitious program of State-Owned Enterprise reform. An SOE Reform Act was passed in 2013 which provided for Community Services Obligations for SOEs. As well, SOEs have to abide by strict guidelines in the provision of regular financial statements and business plans. Under the Act, issuing directorships of SOEs is regulated by stringent guidelines.

Accountant General’s Report

Consolidated Fund Recurrent Revenue and Expenditure Table 2 shows a comparison of actual and budgeted revenue collections in 2015. The total recurrent revenue collected in 2015 was $253.3 million. This is $140.1 million over the total revenue budget estimate of $113.3 million. The significant increase in revenue is due to fishing licences which rose to $197.8 million. Total revenue from fishing license fees exceeded its budget by $122.8 million and reflected the move to the Vessel Day Scheme which has had a significant impact on fishing revenue. Total revenue from all fishing sources was $207.1 million. Fish transshipment fees were also significant, rising to $9.2 million.

There was a large increase in revenue collection in the year 2015 compared to the previous year. In 2014, the total revenue collected was 187.8 million whereas in 2015 revenue had risen to $253.3 million, an increase of $65.5 million or 34.9%.

In 2015, the breakdown from revenue was as follows: Fishing Licenses acounted for 78.1% of total revenue; VAT at 5.7%; Fish Transshipment fees were 3.6%; Company Taxation 2.9%; Personal Taxation at 2.7%; Excise Tax at 2.4%; Budget support was 1.9%; and other Ministries revenue at 1.1%. Total taxation revenue actually received was 110.7% of the budget estimate.

Table 2: Government Recurrent Revenue by Source, 2015 Budget Actual Variance Actual Estimate Percentage Under/ Over $ $ % $ Personal Taxation 7,300,000 6,794,497 2.7 -505,503 Company Taxation 5,600,000 7,461,396 2.9 1,861,396 VAT 13,200,000 14,548,404 5.7 1,348,404 Excise Tax 5,500,000 6,173,439 2.4 673,439 Tax Revenue 31,600,000 34,977,736 13.8 3,377,736

Dividends from Shareholdings 1,200,000 1,262,467 0.5 62,467 Fishing License 75,000,000 197,754,163 78.1 122,754,163 Fish Transhipment License 500,000 9,225,168 3.6 8,725,168 NASDA (AirService) 860,234 1,071,092 0.4 210,858 NASDA (Downrange) 646,967 646,877 0.3 (90) Registration of Ships 680,000 710,817 0.3 30,817 Interest on Consolidated Fund 88,494 0.0 88,494 Other Ministries' revenue 2,770,275 2,797,181 1.1 26,906 Budget Support from World Bank 0 3,781,156 1.5 3,781,156 Budget Support from New Zealand 0 999,940 0.4 999,940 Total Revenue 113,257,476 253,315,090 100.0 140,057,614 Source: MFED

The government revenue base is very narrow and volatile. Fishing licences were estimated to be $75 million for the year 2015 yet the actual licence received was $197.8 million — around 2.6 times the amount initially estimated. Revenue from fishing licenses rose from $141.6 million in 2014 and $89.0 million in 2013. Taxation revenue was $35 million compared with $28.4 million in 2014, and $29.6 million in 2013. The rise was mainly due to time lags associated with the introduction of the VAT in April 2014. The increase in company tax revenue ($7.5 million in 2015 compared with $4.5 million

The original government budget for expenditure approved by Parliament for 2015 was $116.9 million (excluding supplementary estimates) however during the course of the year budget supplements of $19.6 million were requested bringing the total approved budget for FY2015 to $136.5 million.

The actual expenditure incurred in 2015 was $133.2 million (Table 3). This is below the approved revised budget figure resulting in an overall savings of $3.3 million at the end of financial year 2015. Total expenditure was 97.6% of the budget estimate. The major reason for the savings was a lower than expected expenditure for Community Service Obligations and the Freight Subsidy for Local Produce. With the government total expenditure for financial year 2015 at $133.2 million and the total revenue received at $253.3 million, this resulted in a surplus of $120.1 million. This follows the surplus of $67.6 in 2014 and $21.18 million in 2013.

Table 3: Government Recurrent Expenditure by Source in 2015 Revised 2015 Actual Variance Title Actual 2015 Budget Percentage Under/ Over $ $ % $ Office of Te Beretitenti 1,708,761 1,797,285 1.3% (88,524) Public Service Office 602,290 637,668 0.5% (35,378) Judiciary 1,650,029 1,654,347 1.2% (4,318) Police and Prisons 7,262,783 7,329,687 5.5% (66,904) Public Service Commission 241,817 256,698 0.2% (14,881) Ministry of Foreign Affairs and Immigration 2,178,571 2,745,375 2.1% (566,804) Ministry of Internal Affairs 2,229,209 2,208,340 1.7% 20,869 Ministry of Environment, Lands and Agriculture Development 2,999,995 2,999,705 2.3% 290 Maneaba ni Maungatabu 3,066,409 2,809,029 2.1% 257,380 Ministry of Commerce, Industry and Cooperatives 1,480,721 1,379,473 1.0% 101,248 Kiribati National Audit Office 695,235 661,987 0.5% 33,248 Office of the Attorney General 689,188 708,142 0.5% (18,954) Ministry of Fisheries and Marine Resources Development 2,279,743 2,020,278 1.5% 259,465 Ministry of Health and Medical Services 15,522,766 17,792,976 13.4% (2,270,210) Ministry of Education 20,382,954 19,834,251 14.9% 548,703 Ministry of Communication, Transport and Tourism Development 2,677,654 2,666,059 2.0% 11,595 Ministry of Finance and Economic Development 6,438,995 5,864,200 4.4% 574,795 Ministry of Women, Youth and Social Affairs 1,524,061 1,531,335 1.1% (7,274) Ministry of Public Works and Utilities 2,386,334 2,390,739 1.8% (4,405) Ministry of Labour and Human Resource Development 3,684,453 3,684,938 2.8% (485) Ministry of Line and Phoenix Island Development 3,175,030 2,828,832 2.1% 346,198 Office of the Peoples' Lawyer 373,780 403,843 0.3% (30,063) Sub total 83,250,778 84,205,185 63.2% (954,408) Local Contribution to Development Fund 23,150,425 23,150,424 17.4% 0 Debt Servicing 728,740 1,248,999 0.9% (520,259) Subsidies, Grants and Other Commitments 29,401,104 24,626,469 18.5% 4,774,635 Total 136,531,046 133,231,077 100.0% 3,299,969 Source: MFED

Income for MFED The following table 4 shows the income derived from the various Divisions of MFED in 2015. Total revenue from MFED amounted to $41.63 million which accounted for 16.4% of revenue from all sources. The largest amount was VAT of $14.5 million followed by Company Tax at $7.5million. Budget Support in 2015 was $4.8 million.

Table 4: Income by Divisions of MFED, 2015 Accounts Admin Customs Statistics Taxation Grand Total Budget Support 4,781,096 4,781,096 Company tax 7,461,396 7,461,396 Customs Division Servic 40,529 40,529 Customs Licence Fees 12,063 12,063 Dividend 1,262,467 1,262,467 Excise Tax 6,173,439 6,173,439 Interest on consolidated fund 88,494 88,494 Interest on loan charges - - Other taxes - Hotel - Personal income tax 6,794,497 6,794,497 Sale of Publications 30 30 Sale of warehouse Rent 12 12 Sundry revenue 468,344 468,344 VAT 14,548,404 14,548,404 Grand Total 1,730,810 4,869,589 52,604 30 34,977,736 41,630,770 Source: MFED

Expenditure for MFED Table 5 shows the recurrent expenditure by Division for MFED for 2015. Total recurrent expenditure was $5.86 in 2015 which compares with $2.81 million in 2014. Personal emoluments increased significantly due to the Cabinet decision in August 2015 to raise all leave grants by $750. Of the operational costs, external travel was the highest area of expenditure accounting for 37.3% of total operational costs, followed by electricity and gas at 14.9% of operational costs. The high external travel expenditure reflects the high cost of international flights from Kiribati.

Table 5: Expenditure by Divisions of MFED, 2015 Admin Accounts Int Audit NEPO Tax Customs Statisics IT Grand Total KPF Contribution 14,458 27,320 3,729 9,390 12,325 17,802 7,453 4,145 96,621 Salaries 166,514 344,703 45,091 124,872 146,469 207,442 80,822 55,257 1,171,170 Housing Assistance 4,188 7,152 - 13,721 3,839 4,248 - 3,490 36,638 Allowances 19,311 15,300 1,014 5,916 6,580 1,971 120 50,212 Overtime 22,615 47,991 - - 13,674 94,318 493 740 179,831 Temporary Assistance 25,583 19,225 4,618 - 17,557 28,872 18,414 - 114,269 Leave grants 2,911,754 29,375 3,750 7,375 12,125 17,425 6,500 3,750 2,992,054 Sub Total 3,164,423 491,066 58,202 155,358 211,905 376,688 115,653 67,501 4,640,796 Transport to work 40,409 - - - 5,547 2,854 - - 48,810 Internal Travel 12,458 7,325 6,666 - 15,972 13,442 3,371 5,560 64,794 Local Training - - - 300 21 316 - - 637 Local Accom & Allowances Local Training - Catering - - - - - 428 - - 428 Course Fees Civil Servants Relocation Expenses - - - - 18,688 - - - 18,688 Recruitment External Travel 285,889 32,762 3,550 32,440 49,872 21,922 22,157 7,355 455,948 Cleaning Telecomms 79,506 ------79,506 Electricity and gas 123,797 19,032 39,672 182,501 Water Office Transport Advertisements / Media Entertainment 7,857 7,857 Printing - - - - 603 900 - - 1,503 Stationery & Supplies 8,618 35,511 748 2,946 8,155 33,436 1,758 3,416 94,587 Office Equipment & Furniture 11,493 9,622 - - 31,990 5,338 1,916 29,347 89,706 Repairs Equipment 6,581 - - 2,172 - 651 - - 9,404 Uniforms - - - - - 4,861 - - 4,861 Local Services 7,204 8,125 1,348 - 19,144 6,621 4,071 7,688 54,201 Overseas Services - 161 - - - 1,800 - - 1,961 Sundry Purchases Special Expenditure Hire of Plant/Equipment 38,239 69,773 108,012 Fixed Plant and Equipment Sub Total 622,052 93,506 12,312 37,858 169,025 202,014 33,272 53,366 1,223,405 Total Recurrent Budget 3,786,475 584,572 70,514 193,216 380,930 578,702 148,925 120,867 5,864,200 Other Commitments Debt servicing 1,248,999 1,248,999 Copra price subsidy 7,922,331 7,922,331 Freight Subsidy Local Produce - - Pension and KPF 13,964 13,964 Community Service Obligations 2,389,495 2,389,495 Local Contribution to Development Fund 7,314,332 7,314,332 International Contributions 1,505,830 1,505,830 Sub Total 2,389,495 10,083,125 - 7,922,331 - - - - 20,394,951 Grand Total 6,175,970 10,667,696 70,514 8,115,547 380,930 578,702 148,925 120,867 26,259,151 Source: MFED

Comparison of actual MFED financial results with 2015 Budget Table 6 shows the actual expenditure for the Ministry against Budget estimates for recurrent expenditure. On the expenditure side, all Divisions were slightly under budget in 2015, except for Customs. In total. $5.84 million was spent in 2015 by the Ministry, with under expenditure being $574,754 or 8.9% of the total revised recurrent budget.

Table 6: Expenditure for MFED Divisions against Budget, 2015 Revised Variance Actual Budget Over/(Under) $ $ $ Administration 4,254,244 3,786,475 (467,769) Accounts 649,058 584,572 (64,486) Internal Audit 88,944 70,514 (18,430) NEPO 215,997 193,216 (22,781) Tax 397,334 380,930 (16,404) Customs 483,020 578,702 95,682 Statistics 185,389 148,925 (36,464) IT 165,008 120,867 (44,141) Grand Total 6,438,994 5,864,200 (574,794) Source: MFED

Table 7 shows the actual revenue for the Divisions of the Ministry against budget. Taxation revenue was $35.0 million which was above budget by $3.4 million or 10.7%. Both company tax and VAT collections were above budget expectations. Better compliance issues with the introduction of the VAT was most likely why company taxes were above budget expectations. The dividend from the Government of Kiribati’s shareholding with the ANZ Bank in Kiribati was $1.26 million and was slightly higher than the budget estimate of $1.20 million. Another source of revenue, Customs revenue was $52,604, which was $24,904 above the budgeted level.

Table 7: Revenue for MFED Divisions against Budget, 2015 Revised Actual Variance Budget Over/(Under) $ $ $ Admin 4,869,589 4,869,589 Accounts 1,350,000 1,730,810 380,810 Internal Audit NEPO Taxation 31,600,000 34,977,736 3,377,736 Customs 27,700 52,604 24,904 Statistics 30 30 IT Total 32,977,700 41,630,770 8,653,070 Source: MFED

Table 8 shows the expenditure by type against the budget estimates for 2015. While personal emoluments were down significantly against budget (under expended by $774,640 or 14.3%), operational costs recorded an excess of expenditure of $199,846 or 19.5% difference. The main reason for personal emoluments being over budget was the difficulty in estimating the additional cost of leave grants to Ministries introduced during the August session of Parliament. External travel was over budget mainly due to late payments of reimbursements by UN agencies. Overall the MFED budget was under expended by $574,794 or 8.9%.

Table 8: Expenditure by Type against Budget, MFED, 2015 Revised Variance Actual Budget Over/(Under) $ $ $ KPF Contribution 107,829 96,621 (11,208) Salaries 1,403,347 1,171,170 (232,177) Housing Assistance 58,212 36,638 (21,574) Allowances 60,650 50,212 (10,438) Overtime 83,778 179,831 96,053 Temporary Assistance 34,370 114,269 79,900 Leave grants 3,667,250 2,992,054 (675,196) Sub Total 5,415,436 4,640,796 (774,640) Transport to work 55,202 48,810 (6,392) Internal Travel 98,753 64,794 (33,959) Local Training 10,490 637 (9,853) Local Accom & Allowances 330 - (330) Local Training - Catering 5,000 428 (4,573) Course Fees Civil Servants - - - Relocation Expenses 14,200 18,688 4,488 Recruitment - - External Travel 155,339 455,948 300,609 Cleaning 1,600 - (1,600) Telecomms 100,000 79,506 (20,494) Electricity and gas 168,600 182,501 13,901 Water 200 - (200) Office Transport - - Advertisements / Media - - Entertainment 7,000 7,857 857 Printing 5,000 1,503 (3,497) Stationery & Supplies 70,621 94,587 23,966 Office Equipment & Furniture 69,141 89,706 20,565 Repairs Equipment 22,250 9,404 (12,846) Uniforms 7,000 4,861 (2,139) Local Services 42,572 54,201 11,629 Overseas Services 63,000 1,961 (61,039) Sundry Purchases - - - Special Expenditure - - - Hire of Plant/Equipment 127,261 108,012 (19,249) Fixed Plant and Equipment - - - Sub Total 1,023,559 1,223,405 199,846 Total Recurrent Expenditure 6,438,995 5,864,200 (574,794) Source: MFED Kiribati National Statistical Office

At the beginning of 2015, the Partnership in Statistics for Development in the 21st Century (Paris21) funded training on the National Strategic Development for Statistics (NSDS) for the 19

National Statistical Offices hosted by the Secretariat of the Pacific Community. The plan throughout the Pacific region is to coordinate a National Statistical System to enhance the data accessibility and availability for all users and to improve the quality of information for policy formulation.

During the months of April and May, IMF Technical Assistance visited KNSO for support on External Sector Statistics and Economic Outlook. The economic statistics staff continued to report on international standards and formats on Government Finance Statistics and Balance of Payments to the IMF website. The IMF also assisted with technical support on National Accounts at the end of 2015.

The KNSO carried out a Population Census on 7 November 2015. All the islands were enumerated on the date except Kanton (one island in the Phoenix Islands Group) due to the isolation of this island. Kanton was enumerated in February 2016. Preliminary figures are expected to be released in March 2016. The Population Census was a major exercise with over 200 people employed in Tarawa and the outer islands.

Problems existed with the compilation of Trade data in 2015 which caused a delay in the normal publication of international trade data for 2014. All other regular statistical collections were on track. Statistics compiled in 2015 included Prices, National Accounts, Government Financial Statistics, Immigration, Balance of Payments, and Net Investment Position.

Capacity building programs in 2015 undertaken by staff of the KNSO were:  Regional Training Course on the National Strategy for the Development of Statistics (NSDS) 19th January – 22nd January, Noumea (Paris21)  Workshop on Practical Issues on the Compilation of Trade in Goods and Trade in Services Statistics, IMF, Singapore Regional Training Institute (STI), 13th April – 17th April, 2015  2015 Classification Workshop, Nadi, 27th April to 1st May  DFAT Regional Forum in Financing TVET in the Pacific, Nadi, – 4th May – 5th May  HQ 15.04 Balance of Payments (IMF), Washington DC, 4th May- 5th June  Meeting for 2020 Census Round and training on GIS, Noumea, 27th -31st July  Training on website updates – all staff  Monitoring the Sustainable Development Goals: Meeting to identify Asia-Pacific Regional and Sub-regional priorities in Bangkok Thailand, 21st September – 23rd September  Workshop on Gender Statistics, in Nadi, on 5th October to 8th October  FAO Agriculture Statistics Training, Nadi, 5th October to 8th October  GFS Seminar: Consolidation IMF/JSA GFS Capacity Building Project, Suva, 16th November – 24th November  Workshop on Quality Adjustment and Item Substitution on CPI goods, Nadi, – 23th – 27th November  12th SIAP Seminar, Tokyo, Japan, 1st December – 4thDecember  Workshop on Improvements on External Sector Statistics, Nadi, 9th December – 11th December

Internal Audit

Internal Audit provides assistance to managers at all levels in the effective discharge of their duties by furnishing them with analysis, appraisals, recommendations and pertinent comments concerning the activities reviewed, following audit inspections. Internal Audit assists to prevent the misuse of government monies and other assets, by trying to ensure that ministries follow proper procedures and regulations.

While the Internal Audit activities had been mainly focused on financial audits in the past, the Internal Audit Division has started to broaden its area of auditing by carrying out some payroll audits. This is a huge task taken on by a small number of Internal Audit staff but it is anticipated that with more experience in carrying out this task, more payroll audits would be undertaken each year.

Performance, management and IT audits will be the main targets or goals of the Internal Audit in the near future. Accounting and Financial Services

The Accounting and Financial Services Division undertakes the recording of expenditure and revenue for the whole of the Government and provides management reports for all line Ministries. The work involved in the Division includes recording and reconciliation of GOK’s Bank Accounts, the Kiribati Provident Fund and Pension Contributions.

Since the official closure of the Strengthening Public Financial Management Project (SPFM) project in March 2015, the main focus of external assistance has shifted to improving internal processes and procedures within the Accounting Department (Output 3 of SPFM). In June 2015, with the help of the EU Fund, a local Technical Assistant was recruited to implement Output 3 of the SPFM.

Accounting for TELMOs, bank reconciliation, project accounting, cash management, and, most importantly, improving commitment management and expenditure control in line ministries noticeably has improved very much. The tracking of commitments for Local Purchase Orders and Departmental Warrants, the reconciliation between line ministries and MFED and of course timely production and submission of Financial Reports whether it is for management of auditing purposes has also improved tremendously.

As expected from the technical assistant and the treasury, all ministries are now using a uniform E-Votebook, a Microsoft Access database, designed specifically to facilitate the accounting needs of the individual ministry. Very specific as it may be for the ministry, the system is very flexible, very simple but very efficient as well.

The management software package, Attaché, remains an issue with the Treasury due to its limited functionality. Attaché can only produce the Trial Balance. The production of management reports and financial reports however has to be done in parallel with the help of a newly designed database system also developed by the technical assistant. The production of the 2014 Annual Accounts was commendable due to the fact that it was the result of the new database. The Treasury was able to comply with the Annual Account submission deadline because of the system. With the new system, the 2015 Annual Accounts should be completed well ahead of the submission deadline which is the end of June every year.

A proposal to seek alternative software to replace the Attaché system was considered quite a costly exercise. However, this has not been ruled out. Before a major shift or change can be made, management agreed on a work attachment overseas. The idea is to explore and see first- hand what systems neighbouring countries use. A team of three senior officers will be formed including the technical assistant.

The year 2015 was quite a success in terms of the technical assistance progress and also in terms of the internal processes. From the beginning of 2016 until the end of April, hopes are high to see the completion of the line ministries E-Votebook which will then mark the beginning of work to improve analysis and monitoring. While work on improving analysis and monitoring is being implemented, the technical assistant and Acting Accountant General will begin to work on developing the training manual for reference and future use for training. Corporate Services

The Corporate Services Division carries out the administration of the Ministry including human resource development, corporate planning, policy development and planning of MFED activity, including budget management, building maintenance, registry services and support services. It undertakes the administration of staff (leave, hiring of temporary staff) as well as managing staff transportation.

The total number of workforce in ER is 170 while only 148 were actually in post. The total permanent staff was 168 with vacancies at 20. The in-service training from PSO was limited to postgraduate and masters or PhD programmes. The number of staff approved for in-service training are shown in table 9.

Table 9: In-Service Training of Staff, MFED, 2015 Name Training Year Mrs Faitele Mika Masters in Economics 2014 to 2016 Mr Domigo Kabunare Masters in Computing Science 2014 to 2016 LWP Bureeti Boutu Diploma in Accounting 2015 Ms Taotere Korimara Bachelor of Laws 2015 t0 2017 LWP Source: MFED

The HRD plan for 2015 has a detailed report on all training undertaken in-house, overseas short term and long term.

The maintenance and administration of the office is overseen by the Assistant Secretary with the Office Manager as direct report and Registry Clerks, Drivers and Security Guards as support staff. The Senior Management Meeting established the FIC – Finance Infrastructure Committee who tender out services required for the maintenance of the building, toilets and plumbing.

Information Technology

The objective of the IT Division is to ensure that the Information Technology infrastructure is always available, secure and working as expected to support the core services of the Ministry. This infrastructure includes the servers and networking equipment that are hosting and

22 servicing the Accounting Information System, the Taxation Revenue System as well as the internal IT Systems for the Ministry’s headquarters in Bairiki. A staff member of the IT Division is also posted with the Kiribati Customs Services office in Betio and is tasked with the support of the Customs IT Systems on site. The IT Division also provides technical support and advice to all Divisions of the Ministry and from time to time to the Treasury officials who are outposted in each government ministry.

The major changes within the IT Division in 2015 were the introduction of a new website for MFED, the introduction of a new eTax website and the management of the 2015 Population Census database.

The new website of the MFED provides better access by the public with the goal of providing better transparency and accountability in financial management. A large range of information is now produces on the website.

The website total number of hits for 2015 was 10,608.

Figure 1: Monthly Website Hits, MFED 2015.

Source: IT Division, MFED

All businesses are now capable of submitting Tax forms online through the eTax website2 which is manage by the IT Division.

The IT Division had a considerable involvement with the 2015 census. This included the management of the census system and assistance with the database. In addition, the IT Division conducted training for data entry with Census staff. National Economic Planning Office

The National Economic Planning Office (NEPO), advises the Minister and Cabinet on economic policy, produces the annual budget and manages the budget process as well as

2 The Tax can be access through https://www.etax.tax.gov.ki 23 managing aid coordination with donors. NEPO is also responsible for the SOE reform agenda, administration of the RERF, and debt management.

NEPO provides draft policies, statements, and advice on economic and fiscal issues, prepares and monitors development strategies, and finalises development proposals. NEPO has a key role in the formulation and implementation of the Kiribati National Development Plan (KDP) 2012-15 which sets the policy and public expenditure framework for achieving Government’s goal of generating “… a sustained, positive real rate of economic growth per person”. NEPO works with line Ministries to progressively implement strategies and policies. Emphasis has been placed on introducing financial management reforms.

Within NEPO the Strengthening Public Finance Management Project has been assisting with linking planning and budgeting. An integrated Planning and Budgeting Operating and Training Manual has been completed. This manual will guide both NEPO and line ministry staff. Also the project’s Budget Adviser has developed a spreadsheet-based tool for converting budget and actual financial data into either Government Financial Statistics (GFS) or Classification of Functions of Government (COFOG) formats for specific reporting purposes. The tool can be applied to either the former chart of accounts or the new one introduced this year.

NEPO acts as the Secretariat to the Development Coordinating Committee (DCC) which met seven times during 2015. The DCC is responsible for the approval of projects submitted by Ministries for funding during the year. Once approved by the DCC, projects are then submitted to Cabinet for final approval.

The Investment Committee met three times during 2015 to consider issues relating to the sovereign wealth fund, the Revenue Equalisation Reserve Fund (RERF). The RERF stood at $756.3 million at the end of December 2015 compared with $678.97 million at the end of December 2014 and $660.92 million in December 2013. The RERF was replenished in 2015 by $50 million following from the surpluses in 2014 and 2015. This compares with a total of $8.37 million withdrawn from the RERF in 2014 for the purchase of land in Fiji and $9.62 million withdrawn in 2013.

Figure 2: Revenue Equalisation Reserve Fund, Kiribati, 1986 to 2015

Source: NEPO

The debt management policy was approved by Cabinet in late 2013 and subsequently the Debt Management Unit was established in early 2014. The unit works with the SOE and Investment staff. The unit is responsible for maintaining and updating the loan projection database, keeping records of invoices, payments, risk monitoring, and providing advice and updates to Cabinet.

The debt policy is based on four principles: i. The avoidance of non-concessional debt for central government operations; ii. All borrowing and issuance of guarantees should provide economic or social benefits and generate financial returns adequate to cover the cost of servicing debt; iii. Appropriate authority will be gained for all borrowing and issuance of guarantees; iv. Cabinet and decision-makers will receive appropriate advice before authorizing any borrowing and guarantees. At the end of 2015, the present value of the total debt was $48.65 million which is equivalent to 418.1% of export earnings, 22.2% of GDP and 19.2% of revenue. According to the latest IMF/ World Bank Debt Sustainability Analysis in July 2015, despite relatively low debt, Kiribati remains at high risk of debt distress, mainly because of its low export base and its historically low average growth.

Figure 3: Value of Total Debt, Kiribati, 2015 to 2043

Source: NEPO Annual debt payments in 2015 were $815,100 This was 7.0% of exports and 0.3% of revenue. Annual debt payments will reach a peak of $3.6 million in 2021. Figure 4: Annual Debt Payments, Kiribati, 2014 to 2043

Source: NEPO

During 2015, measures under the new SOE Act were monitoried. This included full compliance of all SOE board appointments with the provisions of the Act; the provision of Statements of Intent by SOEs3; and SOE Community Service Obligations were included in the 2015 annual budget. The rationalization of the coconut industry was a key reform undertaken in 2015.

3 Statements of Intent are statements of the agreement between Ministers and the SOE on their business strategy over the next three years. 26

The ADB has approved a second technical assistance project entitled “Enhancing economic competitiveness through State-owned Enterprise reform” to further progress the SOE reform program. Reforms will include the rationalization of three SOEs (including the Plant and Vehicle Unit and domestic shipping) as well as providing training workshops for SOE managers and SOE directors on planning, finance, performance monitoring, human resources and reporting under the Act.

An Economic Reform Taskforce was created by the Government. It now comprises the Secretaries of Cabinet and Finance, the key Ministries of Fisheries, Communications and Commerce as well as representatives from donor agencies. The Taskforce monitors progress against the Economic Reform Plan and coordinates technical assistance to ensure that adequate capacity is available to sustain progress against key actions of the Plan. The Economic Reform Taskforce met three times in 2015. As a result of the economic reforms and reforms to SOEs, Budget Support of $4.8 million was provided by the World Bank and New Zealand. The support was based on the Government of Kiribati meeting agreed targets in the economic reform program including:  A second joint report on sources of fisheries revenue was produced by the Ministry of Fisheries and Marine Resource Development and MFED. This report is available on the MFED website.  The Government reviewed all existing fisheries joint ventures and approved the restructuring or dissolution of two of the fisheries joint ventures.  Terms of reference for a public procurement review were issued.  Reform actions to improve the management of its Revenue Equalization Reserve Fund were completed including termination of the incumbent manager, appointment of the new external managers, and execution of the approved strategic asset allocation.  A comprehensive database of public debt, was established including the debt of SOEs and joint ventures.  An international bidding process for the granting of a second mobile operator license to introduce competition in the cellular mobile communications services in Kiribati was undertaken.  In February 2016, the recruitment of an international CEO for the Public Utilities Board to manage and implement a medium-term reform plan was completed.  The government awarded a public–private partnership concession for Betio Shipyard Limited.  In coconut industry reform, the transfer of the KCCS staff, assets, and liabilities to a newly merged Copra SOE (KCDL) was approved. As well the new Board of Directors for KCDL was appointed, and a new CEO of the KCDL recruited.

Seminars for Ministries were undertaken during the year on the Project Cycle, Budget Process, Monitoring and Evaluation, and Ministry Strategic Plans. Staff training was carried out on Speech Writing, the RERF, the Economic Outlook, Debt Management, Report Writing, Management Principles, SOE Reform, Leadership, and Project Implementation. Excel Intermediate training was carried out for all Ministry staff. A seminar on the RERF was held for Division Heads.

RERF Seminar, March 2015.

Conferences, workshops and training courses attended by staff in 2015 include:  Scaling up Renewable Energy in Low Income Countries Program (SREP), the Climate Investment Funds (CIF) of the Ministry of Foreign Affairs of the Netherlands, a workshop for the newly selected SREP countries to introduce the process and key elements of developing an SREP investment plan. The Hague, Netherlands on February 26 and 27, 2015  High-level Policy Dialogue on the Implementation of Istanbul Plan of Action for LDCs for 2011-2020, Siem Reap, Cambodia, 4-6 March 2015.  ADB International Workshop on Promoting Remittances for Development Finance Manila, Philippines 18-19 March 2015,  Public Debt Management Forum will be held at Male in the Maldives from 21-23 April.  PFTAC workshop on incorporating Disaster Risks into fiscal planning Suva on 9-10 March  Minister and Director of NEPO to Sydney for due diligence for the RERF asset manager selection, 18-19 March  Asia Clean Energy Forum at the ADB in Manila, 15-19 June  Supporting Safe, Efficient & Sustainable Maritime Transport Sys: Improving Ports & Maritime Shipping Study Final Workshop, Sydney, Australia 10-11 June 2015,  Green Climate Fund Workshop, 27-29 July, Suva  Strengthening Fiscal Frameworks in the Pacific Islands Strengthening Fiscal Frameworks in the Pacific Islands, 22-24 June  High-level political forum on sustainable development in New York, UN ESCAP from 26 June- 8 July  Pacific Island Forum workshop on MDGs, Suva, 13 July

 MDGs workshop with PIF, Suva, 4-6 August  EU workshop  2015 Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund, Lima, 9-11 October  GCF Readiness Support Workshop for SIDS, Tokyo, 14-16 September  Fifth Regional Forum on Investment Management of Foreign Exchange Reserves in Bangkok from 23-25 September  2015 Forum Economic Ministers’ Meeting – Cook Islands – end of October  Sub-regional Capacity-building Workshop on Financial Reporting and Resource Mobilization for the Pacific Region, Avarua, Cook Islands 5-6 October 2015  GEF Expanded Constituency Workshop in Cook Islands, 6-8 October  Korea Partnership Discussions  Climate Negotiations, UNFCCC, Bonn, 12-26 October  National Focal Point meeting on the implementation of the Istanbul Programme of Action, Brussels, 7-8 December  ESCAP meeting for Expert Group on 30 November and the Committee on Macroeconomic Policy, Poverty Reduction and Inclusive Development, Bangkok, 1-3 December 2015

Kiribati Customs Services

This output includes mainly revenue collection, policy advice and compliance. It also covers border management, enforcement activities and services to clients, including the general public and Government.

The Kiribati Customs Service (KCS) core functional roles are revenue collection, border security and trade facilitation. It also provides policy advice to the Government through MFED. Aside from these three core functions, KCS also enforces the Wreck and Salvage Ordinance.

With the introduction of VAT and Excise Tax and the abolition of Import Duties, KCS is now able to focus more on its core functions such as trade facilitation and border protection. In trade facilitation, the KCS plays a key role in Free Trade Agreement (FTA) negotiations in assisting the Ministry of Commerce, Industry and Cooperatives (MCIC) on trade in goods relating to Customs matters.

KCS is now working closely with Kiribati Police and Prison Service. An MOU has been signed to work collaboratively with Immigration and Police in establishing a Transnational Crime Unit (TCU) at the national level that deals with intelligence matters. This initiative to combat fraud and smuggling activities, has possible effects on revenue collection as well as border security.

At the end of 2015, VAT collections amounted to $14.54 million and Excise Tax amounted to $6.17 million. There is an anticipation of an increase in Excise Tax collection in future as there are potential local liquor manufacturers who have already applied for their license.

Though there are challenges that KCS faced from time to time especially with new ways of doing businesses, team work and good networking with other stakeholders can meet those challenges.

Taxation

The outputs of the Taxation Division include collection of Personal income tax or Pay As You Earn (PAYE), Company or Business Tax, The Value Added Tax (VAT) and improving of tax voluntary compliance by educating taxpayers through radio, pamphlets, circulating letters and outer island visits and consultation with business and employers throughout Kiribati.

In December 2013, Parliament enacted three new Tax laws namely:  The Excise Tax Act 2013  The Value-Added Tax Act 2013  The Revenue Administration Act 2013

The Excise Tax Act introduced an excise tax, and allowed for the registration of manufacturers of excisable goods. Customs Duties were abolished. The Excise Tax Act commences it operation from its ascension i.e. on 31 December 2013.

The VAT was set at 12.5% and the registration threshold was set at $100,000. VAT forms are required to be filled in every quarter. The Act also allowed for the prevention of price exploitation with the introduction of the VAT and provided for penalties for non-lodgement of returns. The VAT came into operation from 1 April 2014.

The Revenue Administration Act (RAA) allowed for a Taxpayer Identification Number (TIN). This will reinforce processes for verifying and maintaining the integrity of taxpayer information and compliance obligations (registration, filing and payment). The Act also outlines an appeals process, allows for registration of tax agents and provides for penalties for failure to lodge tax returns or pay tax on time. Similarly to the Excise Tax Act, the RAA commenced its operation from its ascension on 31 December 2013.

There are three types of meetings within Tax Division, including staff meetings. These are scheduled monthly but this is not regularly happening due to some barriers in relation to staff responsibilities and their availability. A briefing meeting is conducted every Monday and Friday morning where all staff are expected to attend in order to input to what has been discussed on daily activities and aims that should be achieved during that week. The Management Meeting is significant as the Commissioner gives the update on the Division’s achievements and discussions are carried out on important issues according to their specific task within the Division. Within that discussion the Commissioner can acquire information from Heads of Sections for all staff ‘s disciplinary record and remind Heads of Sections to improve their performance and attendance.

Kiribati Fiduciary Services Unit (KFSU)

The KFSU was set up to provide procurement services to the major infrastructure projects being conducted by the World Bank, ADB and IFAD. Projects serviced by KFSU include the Kiribati Road Rehabilitation Project, Kiribati Aviation Investment Project, Kiribati Adaptation Project Phase III, South Tarawa Sanitation Improvement Sector Project, Kiribati Telecommunications & ICT Development Project, Kiribati Grid Connected Solar

Photovoltaic Project and Improving Services for Victims of Gender Based & Domestic Violence Project.

Some staff changes were necessary during 2015, and the recruitment of new staff (for vacant positions as well as for replacements) has proved difficult. As at the end of 2015, KFSU has a Manager, three Accountants, one Procurement Officer, one Records Officer and one Financial Management Adviser. KFSU is short of an additional Procurement Officer, an additional Accountant/Finance Manager, general administrative support for financial management, and a Procurement Adviser (although a Procurement Adviser did undertake specific assignments for two projects). This has been the biggest challenge facing KFSU.