From now until 2020, the Tongan government will be charging a tax on each pa’anga that enters or leaves the country to pay for the Pacific Games.

The Foreign Exchange Levy will become effective from June 1 this year and will remain in force until June 30, 2020.

“The proceeds from the levy is included in the 2016/17 budget and will assist Government finance its hosting responsibilities for the 2019 South Pacific Games as an important event for the Kingdom,” Minister for Finance and National Planning Hon. ‘Aisake Eke said.

Under the terms of its agreement to host the Games, Tonga is committed to having world class facilities in place to host the athletes who attend the tournament.

However, levying a tax on foreign exchange could be provide a major boost for Games funding.

Tonga is heavily reliant on imports of food, machinery, drugs, equipment and many other items. The kingdom remains heavily dependent on remittances from Tongans living overseas and that means a lot of foreign exchange operations. According to the Tongan Reserve Bank, remittances just in January this year were TP$17.3 million.

Imposing a levy on these kinds of monetary flows will, the government hopes, provide the financial windfall it needs to pay for the estimated NZ$73.6-100 million the Games will cost.

Some outside observers see the Games as a positive factor in Tonga’s financial development into 2017.

The Asian Development Bank said in a recent report that preparations for the South Pacific Games, and investments in tourism and government offices were expected to uphold growth at 2.8% in the 2016 fiscal year and 2.7% in the 2017 fiscal year.

The Ministry of Finance and National Planning said in a statement that under the new law, every financial institutions bank, and money transfer operator would have to collect the levy from every purchase or sale of foreign currency in Tonga and pay to Government on a monthly basis.

The levy is being assessed according to a complex formula which the ministry is describing as ‘half a seniti of the spread’ on every one pa’anga value of every purchase and sale of foreign currency effective.

Financial institutions will be required to keep financial records of all foreign exchange purchases and sales.

Fines of up to TP$20,000 will be imposed on institutions that fail to comply with the new law.

The main points

  • From now until 2020, the Tongan government will be charging a tax on each pa’anga that enters or leaves the country to pay for the Pacific Games.
  • The Foreign Exchange Levy will become effective from June 1 this year and will remain in force until June 30, 2020.
  • Under the terms of its agreement to host the Games, Tonga is committed to having world class facilities in place to host the athletes who attend the tournament.
  • Levying a tax on foreign exchange could be provide a major boost for Games funding.

For more information

Foreign Exchange Regulations (Ministry of Finance and National Planning)

Remittances (Tonga Reserve Bank)