Note: The Motion was defeated in favour of the Government side with 16 Opposition Members voting in support of it, 27 Government Members opposing it, and 7 Members of Parliament not voting (absent at the time of the Vote). View the results of the Vote here.
Text of Motion for Debate as tabled by NFP Opposition Member, Hon Prem Singh to review the Capital Gains Tax Act of 2014. Please check against delivery.
Madam Speaker…
I move the following Motion: – “That this Parliament supports a review of the Capital Gains Tax Act of 2014 to streamline its provisions of CGT Exemption for gifting of Assets amongst immediate family members in accordance with Hon. Minister of Finance’s 2015 Budget announcement of 21st November 2014.”
Madam Speaker, on Thursday 11th December, Parliament passed an Act to amend the Capital Gains Tax Decree 2011 – Act Number 11 of 2014. The Capital Gains Tax (Budget Amendment) Act was given the Assent by His Excellency the President on 15th December 2014.
Madam Speaker this was one of the 15 Bills brought to Parliament by the Attorney General and Minister for Finance on 11th December last year under Sanding Orders 51(2), which is to consider them without delay. Parliament was asked to pass all the 15 Bills after an overall 5 minute time limit to each side of Parliament for debating the Bills.
Now Madam Speaker, we can recall from Hansard of the day that the Opposition strongly protested against the motion of the Attorney General to proceed to consider the Bills without delay on the basis of why the same Bills were withdrawn by him earlier. I will allude to what happened on that day and why it is important for Parliament to agree to the Review based on the process that was adopted.
Now Madam Speaker on Friday 21st November 2014, the Attorney General and Minister for Finance handed down the 2015 Budget in Parliament. The title oF the Budget was “Turning Promises into Deeds”.
On page 240 of the Hansard of 21st November on the 2015 Appropriation Bill under the sub-heading of Housing, the A G and Minister for Finance stated and I quote, “Government from next year will also exempt from Capital Gains Tax any transfer of assets in cases of love and affection – that is, transfers from parents to children, between spouses and within and between grandchildren and grandparents and between siblings”. – Unquote
Madam Speaker , allow me to repeat this announcement by the Minister for Finance in his Budget: – “Government from next year will also exempt from Capital Gains Tax any transfer of assets in cases of love and affection – that is, transfers from parents to children, between spouses and within and between grandchildren and grandparents and between siblings”. And I place strong emphasis on the words “any asset”.
Madam Speaker, this announcement was whole heartedly welcomed by Fijians and our Financial Sector. In accordance with post-Budget tradition, reaction is swift from the Financial Sector, especially from our prominent and reputable Accounting Firms, who analyse, publish and publicly release their synopsis. PWC – Price Waterhouse Coopers analysed the announcement as 1. Exempt CGT on Transfers on Love and Affection 2. Exempt CGT on gain made from sale of shares for private companies listed in the South Pacific Stock Exchange
Again Madam Speaker, I emphasise Transfers.
Another firm, Ernst & Young made similar analysis, “Exemption on Transfers – Love and Affection Transfers for all those eligible under the Love and Affection Criteria. Again emphasis is on Transfers.
Similarly Madam Speaker, another reputable firm, KPMG, made exactly the same analysis, which is “Exemption of CGT (Capital Gains Tax) on love and affection transfers”. Again emphasis is on Transfers”.
But Madam Speaker Bill Number 23 of 2014 which was enacted into the Capital Gains Tax (Budget Amendment) Act of 2014 is distinctly different from what the Attorney General and Minister for Finance announced on 21st November 2014.
The Act (formerly Bill No. 23) amends Section 7 of the Capital Gains Tax Decree 2011 (on Exemptions) by inserting amongst others, this new paragraph and I quote, “A capital gain made by a resident upon the disposal of a principal place of residence, shares or shares in a company, by way of love and affection between spouses, siblings, parents to children and vice versa, and grandchildren to grandparents and vice versa”.
Madam Speaker, this is distinctly different from what was announced by the Attorney General and Minister for Finance while handling down the 2015 Budget on 21st November 2014, which is “exemption of Capital Gains from ANY TRANSFER OF ASSETS in cases of love and affection”.
ANY TRANSFER OF ASSETS changed into principal place of residence in Bill No. 23 of 2014 that became the Capital Gains Tax (Budget Amendment) Act of 2014 or Act No. 11 of 2014.
Based on the announcement by the Attorney General and Minister for Finance, many of our citizens, mostly elderly, who are in the twilight years of their lives, with little financial savings but who in their wisdom and through sheer hard work, acquired assets such as land, wanted to transfer them to their children oR other loved ones, on the understanding they will be exempt from paying Capital Gains Tax. And these assets are not of any astronomical financial worth but a small block of land for example.
Madam Speaker, I know of a case of a 74 year old who transferred a small block of land to his son but was charged CGT by FRCA – Fiji Revenue & Customs Authority. When the gentleman enquired with FRCA, he was informed that the exemption of CGT only applies to principal place of residence. This gentleman told FRCA the Attorney General had announced otherwise in his Budget, but was shown the Capital Gains Act which did not contain what was announced on 21st November 2014.
Madam Speaker, We on this side of the House cannot be blamed for failure. The fact is that when Bill No. 23 – one of the 15 Bills was brought before Parliament on 11th December 2014, we strongly protested against the manner in which the A G wanted them scrutinised and enacted without delay under Standing Order 51(2). When the five minute rule was proposed, we understood it to be five minutes for each of the 15 Bills, but the Attorney General said No, you will get a total of five minutes for the entire 15 Bills.
A perusal of Hansard of December 11 2014 will confirm what I am saying, Madam Speaker. Government claimed all 15 were consequential Bills, arising out of the Budget, and were merely implementing the policy framework of the Budget. We now know that this was not the case – at least as far as the exemption of Capital Gains Tax for Any Transfers for love and affection is concerned. Little has changed from the Capital Gains Tax Amendment Decree. The Decree also exempted CGT from sale of principal place of residence. The only change is the transfer of shares. How many of our ordinary Fijians own shares, Madam Speaker?
On Thursday 11, 2014, We were accused of suffering from amnesia, amongst other things, particularly by the Attorney-General and two other colleagues, and of not understanding what a consequential legislation is.
Madam Speaker page 598 of Hansard of 11th December 2014 quotes the Attorney-General and minister for Finance as saying in his right of reply and I quote, “Capital Gains (Amendment) Decree, we are now saying that we will be exempted from Capital Gains Tax if, for love or affection, you give your property to your daughter or to your son or a grandfather giving it to his grandchildren or between spouses”. Unquote
I emphasise PROPERTY – not principal place of residence as the Act stipulates. Is this what is Government’s version of “Turning promises into deeds”, Madam Speaker? Isn’t this misleading not only the people of Fiji but this House as well? One now can understand the AG’s motive of trying to rush through 15 Bills through Parliament with the Opposition being given 5 minutes to debate all 15.
It is an abuse of parliamentary process, riding roughshod over one side of the House because the other has the numbers and telling us you have 20 seconds to scrutinise each Bill on the floor of Parliament. This is what it amounts to – being allowed 5 minutes to scrutinise 15 Bills.
Madam Speaker, The Capital Gains Tax (Budget Amendment) Act No. 11 of 2014 must be reviewed to reflect the policy change announced by the Minister for Finance on 21st November 2014. And the Finance Minister must direct FRCA to refund all Fijians who transferred any asset for love and affection to be refunded Capital Gains Tax that they were forced to pay for such transfers. Otherwise this Government would have turned promises into mis-deeds.
Madam Speaker, I commend this Motion to the House.