The government has been urged to reconsider its tax incentive schemes for foreign investors to protect small local companies.
The call comes from within the business community following the news that multinational company, Digicel, is planning to enter the tourism market next year.
A businesswoman who only wants to be identified as “Sandra” for fear of repercussions on her business contacted the Sunday Samoan to highlight her concerns. The woman claims that multi-national companies are using benefits offered through the government’s tax credit incentives to start businesses, which then end up competing against smaller operators.
The decision by Digicel to enter the tourism industry is an example, she said.
But her concern is not confined to tourism. She said the same thing could happen to all other industries and the government has to be alert about the consequences.
“I have nothing against Digicel setting up a hotel,” she said. “What I’m worried about and this is why I am raising this matter is the unfairness on the smaller businesses, including many small hoteliers who will be disadvantaged by this.”
Two weeks ago, Digicel’s former C.E.O, Rory Condon, revealed the company’s plan to enter the tourism industry. Although the company has yet to make a formal announcement, Mr. Condon said Digicel wants to add value to what’s already available in the Samoan tourism market.
“It’s a plan that’s rooted in the future success of the Samoan tourism Industry,” he said about the hotel plan. “I have been working on a plan for a couple of years now. Personally I come from a country that has built a strong, tourism economy while at the same time guarding its traditions and its cultures and playing to its unique strengths that attracts tourists."
“So it’s with this mindset that we put together a plan for a development in Apia. We work really closely with the Samoa Tourism Authority (S.T.A.) and the Ministry of Commerce, Industry and Labor (M.C.I.L.) as well as other government departments who support our vision.”
But it’s a vision that worries Sandra. She claims that Digicel is looking to use the benefits of Samoa’s tax incentive schemes to build a hotel.
“It means the government will not be getting this revenue from a foreign company that has already been given so many other benefits to stay in Samoa,” she said. “This is tax money that should be paid to the Ministry of Revenue. It is money that should be put back into the development of Samoa through education, health and other critical developments and yet it will instead be used to make more money for these foreign companies who then take their money outside Samoa and we end up with nothing."
“This worries me. I think it’s absolutely essential these government officials have got to wake up and review their foreign investment laws."
“We’ve got so many small businesses in Samoa struggling to stay afloat. If you look at the hotel industry, many small hotels are barely able to open because they cannot pay their debt."
“They are the companies that the government should be looking to help, not open the door to another big player to use its size to disadvantaged smaller players in the market.”
Attempts to contact both the Minister of Finance, Sili Epa Tuioti and the Minister of Revenue, Tialavea Tionisio Hunt for comments were unsuccessful.
But a Member of Parliament the Sunday Samoan spoke with about the issue said the concern is not lost among Cabinet Ministers and relevant government officials who are likely to change the tax laws in the future to shut the loophole.
“I think from a government perspective it’s all about creating more jobs for our people and in the tourism industry there is a need for more hotels to create more jobs,” said the Member of Parliament.
“But the loophole from what I see is in relation to big multinational companies who use it to advance their purposes. I agree that this is unfair and there is a need for the government to review their processes and do something about it quickly."
“Obviously with any law, there are always holes and maybe the government didn’t foresee what’s happening now. I mean we are talking about millions of dollars that should be government revenue through taxes which will now be diverted elsewhere.”
The Member of Parliament also highlighted another concern about Digicel’s plan.
“As most people will know, if you look at the tourism industry today and the numbers at the hotels, it’s in a disaster,” he said. “When Digicel enters the market, they will be competing against some of these smaller hotels who are already struggling to pay their debts. It would be better for the government to increase and improve the number of tourists first before they should get more hotels.”
Opposition Member of Parliament, Olo Fiti Vaai, told the Sunday Samoan he would need time to study the implications of the move before he could comment further.