Parliament of Fiji

Question put.

Minutes as amended agreed to.

COMMUNICATION FROM THE CHAIR

MR. PRESIDENT.- Honourable Senators, our reflection from the Bible today is taken from the I Corinthians : 3 - 8, which reads and I quote:

"He who plants and he who waters are one and each one will receive his own reward".

RESUMPTION OF DEBATE ON THE VALUE ADDED TAX DECREE

(DIPLOMATIC MISSIONS - AMENDMENT) BILL, 2006

HON. SENATOR J. KOROI.- Mr. President, Sir, I rise to make a brief contribution to the Bill before the House. Sir, during the briefing session on Monday, 2nd October, we were informed that the amendment to the VAT Decree Bill (Bill No. 13 of 2006), is specifically to enable the US Diplomatic Mission's resident in Fiji to claim VAT refund on the construction of their office complex which will be constructed at Princes Road, Tamavua next year.

Being one of the richest and powerful countries in the world, I somehow cannot come to terms with the request for the special provision the US Embassy is making, yet the Australian Embassy constructed their office and residential complex at the corner of Reservoir Road and Princes Road with no such request for assistance.

Mr. President, may I be permitted to speak in the vernacular.

Turaga na i Liuliu ni Bose, ena nomuni veivakadonui, au kerea me'u bau cau ena vakatutu ni kena moici na lawa ni Vakacavacava (VAT), me rawa ni ciqomi kina na kerekere ni Matanitu levu ko Amerika.

Au gadreva saka me'u vakaraitaka na lomaqu, ka sega ni kena i balebale ni'u sega ni duavata kei na veika esa duavata kina o Viti ka dusi vakamatata koto ena veidinadinati ni Vienna Convention, me baleta na noda veitokoni vei ira na matanitu era mai via vakaduri valenivolavola eke.

Turaga na i Liuliu ni Bose, au sega ni taleitaka na kena sagai me veisautaki na wase 70-A(1) ni lawa na VAT, me ceguva vakatabakidua na kerekere ni Matanitu o America, me kakua ni okati ena i vakacavacava oqo na VAT se me soli vei Amerika na galala me saumi lesu tale (claim) vua na i vakacavacava oqo na VAT.

Kemuni na noqu i tokani lewe ni Bose cecere oqo, au vakabauta ni ko ni na duavata kei au ni Matanitu oqo o Amerika, e kilai levu ena veika oqo:

(a) E matanitu levu;

(b) E coka i drauna na kena bula vakailavo;

(d) E tawa wiliki rawa na nona makete ni buli yaya kei na veivoli;

(e) E totoka na rawa ka ni nona mataivalu;

(f) E roboti vuravura kece na nona veiwekani vakailavo, vakacakacaka kei na vuqa tale.

Turaga na i Liuliu ni Bose, au rui nuiqawaqawataka sara vakalevu na noda via vakadonuya na kerekere nei Amerika, ni sa naulu sobu tiko mada ga na noda bula vakailavo.

E vica na ka, Turaga na i Liuliu Bose, au gadreva meda raica mada:

(a) Na tubu cake ni sau ni yaya me vaka na valawa;

(b) Na tubu cake ni sau ni waiwai ni tolili;

(d) Na vakanananu ni kena na vakatuburi cake na VAT;

(e) Na Melanesian Arts Festival, ka sa tekivutaki ena Tusiti sa dromu, ka sega mada ga ni se veivosakitaki ena mata Bose cecere oqo.

Au vakabauta, Turaga na i Liuliu ni Bose, ni sa rauti ira vakavinaka na noda, na dredre era dui sotava tiko, ia kevaka e vakadonui vei Amerika na nona kerekere, au kerea vua na Tamada mai lomalagi, me'u kakua ni okati ena i vakarau ni veivakalolomataki vaka oqo.

Au sega saka ni duavata, Turaga na i Liuliu ni Bose, meda solia na noda dina ki na dua na Matanitu e rawati koya tu vakavinaka, ka'u raica toka e mataqu na nodra kudru, tagi kei na rarawa na kawa i Taukei kei na veimata tamata tale eso eda sa mai bunoca vata tiko na kena sagai me vueti cake na bula vakailavo ni noda vanua ko Viti. Turaga na i Liuliu ni Bose, e taroga na lomaqu; se cava na vuna e sega ni bau kerea kina ko Ositerelia na veivuke vakaoqo? Na Matanitu sara ga eda sega ni namaka me kerei keda, o Amerika, esa basika na nona kerekere.

Turaga na i Liuliu ni Bose, ena vuku saka ni noda veidinadinati vaka-matanitu, na Vienna Convention, au tokona saka kina na vakatutu oqo, ia, e kila tu na Tamada sa tabogo na vuabale ni noqu tagica voli na dredre era sotava na lewe i Viti, dina ga ni sa rairai nona i tuvatuva beka na Kalou meda mai veivosakitaka na tiki ni lawa bibi oqo. Turaga na i Liuliu ni Bose, au sa kerea me'u vosoti de rawa ni bau vakasukai tale na kena veivosakitaki na tiki ni lawa bibi oqo ni VAT ki na kena matabose dodonu me vakuria na kena dikevi.

Au na sega saka ni vakagolea na veidokai kei na veivakalagilagi vei ira na noda na lewe i Viti, kevaka au tokona na vakatutu ni kena veisautaki na i wasewase 70(a)(1) ni lawa ni vakacavaca na VAT. Au rerevaka, saka, de'u na mate vata kei na noqu dinau vei ira na lewe i Viti, ni'u sa kila tu na drakidrakita ni bula era sotava tiko, ia, au qai tokona ga na vakatutu oqo. Kevaka eda tokona na kena veisautaki na tiki ni lawa oqo, esa na dua dina na veivakalolomataki levu eda na vakayacora na lewe ni matabose cecere oqo. Meda na tu vakarau meda na saumi taro vua na Tamada, ena lewa cala eda vakayacora ena dela ni gauna eda bula donuya, ka nuitaki ni da na mai vakadeuca ka vakatauca na lewa matau duadua me baleti Viti kei ira na lewena.

Ni yalo vinaka saka, Turaga na i Liuliu ni Bose, kemuni na noqu i tokani mai na Bose Levu Vakaturaga, kei kemuni na noqu i tokani vakailesilesi mai na Matanitu, mo ni vosoti au e daidai ni'u via vakaraitaka vei kemuni kei ira na lewe i Viti, ni'u sega saka ni tokona na vakatutu ni kena veisautaki na tiki ni lawa e veivosakitaki tiko oqo me baleta na lawa ni vakacavacaca, na VAT.

HON. SENATOR A. KALOUMAIRA.- Mr. President, Sir, I rise to contribute to the debate and declare upfront my support of the Bill that is now before the House.

In stating these intentions, Sir, I have taken note of the observations made by the honourable Senator Ratu Buaserau, regarding provisions under the Diplomatic Privileges. I am of the view that the honourable Minister for Finance and National Planning has acted with due diligence in executing his duties, as required under Chapter 12 - Section 179 of the Constitution, specifically to appropriation and taxing measures, and referring this to the House has been most appropriate and correct.

Fiji, as we are all aware, Sir, is a small developing country. In an ever-tightening globe, we are one, and everyone is jostling each other, as was contextualised by honourable Senator Khan, in moving the Bill. Being small, we should (and opportunity arises) invest on friends of Fiji and to do so wisely, fully cognisance of our dependency. I submit that the operative word is "investment". We need to reach out and not recoil, adding more members to the club "friends of Fiji", whilst maintaining solidarity with those members we have now.

Sir, a life of a building is in the very least, 30 years, and those substantial ones as embassies, maybe 50 years and more. Yes, having tax now on completely new premises for embassies as specified in this Bill, is definitely a good investment, albeit, a very small investment, when viewed over the span of the function life of an embassy building. In diplomatic circles, an underlying measure of success for us in our important relationships with these donor countries, is on how well we develop our negotiating skills, framed with understanding the culture of a foreign nation that we are dealing with. These are values, Sir, which are hard to quantify.

Mr. President, Sir, I thank the honourable mover of the Bill, for indicating that a request from the US instigated the process to this Bill before the House. The maritime province of Lomaiviti, on whose behalf I am in this House, strongly welcomes a strengthened presence in the country of the US expertise, to detect early indicators of terrorist activities. It is reassuring for us to have an ally, who whilst admittedly is doing this for its own purpose, is a custodian of detection and early warning systems, as well as information and other instruments that potentially, we can negotiate on to fill a large gap in our surveillance and monitoring capabilities. All I urge, Sir, is for the Government to fully tap these allies, USA and others, in strengthening our border control and national security capacities and capabilities.

We are most vulnerable over our outlying islands and impossible to police wide open spaces between them. Our hope is to maintain effective surveillance through strategic partnerships with our big brothers and the more, the merrier. Hence, for Fiji, to nestle comfortably in a negotiating canoe in this instance, with USA, we should have done our homework in expressing that we are friendly to the new USA of the President Bush era, given the global focus that USA places on routing out terrorism.

Mr. President, Sir, in regards to VAT, the Bill proposes it to be waived. I am comfortable with that, in view of the context of a test from the USA on Fiji's willingness for it to exert this due on this friendship. From US's perspective, a small due of about US$5 million, more symbolic and substance. This is a culture, many of my learned colleagues here in the House would have picked up as well from experience in dealing with USA, as I have learnt over the last 10 years in my work in the discipline of Disaster Risk Management at regional and international level. Hence, I say, Sir, that rather than being deprived of $8 million, Fiji is all the better from a USA friend of Fiji perspective and I recall the word of God shared by the honourable President on Tuesday, 3rd, that people need more than bread for this life.

I agree that Fiji needs revenue and a waiver of tax is equated to a loss of revenue now, but I believe that the context and spirit of this Bill is one looking at spreading our risk via our down payment and investment in the correct signal, Fiji is friendly to foreign countries that would like to build embassies here. Embassies are influential conduit for private investors, as well as representatives of their government. Embassies portray a sense of security to foreign investors, as well as play a very proactive role in making private entrepreneurs either meet individually or as an organised business forum. We need investors and investors need investor-friendly environment and policies, and I do hope that the very signals emanating from this august House will, in the end, blend into one beautiful siren of support.

Not to detract from the subject, Sir, I fully support the call made by honourable Senator Colonel Sarasau, that for boosting the VAT revenue fund, we should rather be tasking Government to act on the overview collection of $30 million owed in VAT from Government Departments alone, and an additional $90 million in uncollected taxes from entities and individuals in Fiji. To conclude, the reality is that, in the final measure, we also need to extract our dues and you look to government that will be vigilant on this, over time to come.

Mr. President, Sir, I support the Bill before the House.

HON. SENATOR B. PRASAD.- Mr. President, Sir, I wish to make a very brief contribution to the Bill before the House. I have a lot of respect for the Americans and America. Most of my family members reside in America and I also hold a Multiple Visitors Visa. I am not going to talk about the interest and welfare of that nation, I have been charged with the responsibility of looking after the people of this nation and this country.

Sir, this $8 million, for some reason, has become a magical figure these days. In the media, we hear of more than $8 million been swindled under the guise of Agricultural Assistance. I do not want to speak or elaborate on that, otherwise the honourable and learned Attorney-General and Minister for Justice will rise on a point of order and say; "This is a prejudice". Sir, if the application for the $8 million VAT which the Government contemplates waiving to accommodate the big brother, had come from a church, school or charitable organisation, I would have no problem supporting the Bill.

Mr. President, Sir, we should seriously evaluate our open-handedness. Our economy has ground to a halt, we are robbing Paul to pay Peter. In this sort of precarious financial environment, we cannot afford to be writing off large sums of money. We have the responsibility of providing for the needs of our citizens. We are broke. The honourable Minister for Works and Energy says; "no money to maintain roads", and in the news yesterday and today, there has been no bus service operating on the King's Road. The news is very simple, we hear the news and say: "Oh, so there is no bus running on the King's Road". But think of the school children, the sick and those who want to take their produce and sell in the markets; there is no transport for them, and this happens to be on the eve of the long weekend. We have no feelings for these people, but we do not have the money to fix the roads. We should have worked 24 hours round the clock to fix the roads, so that buses could operate.

Sir, the Ministry of Health has no money to fix the much talked about Decompression Chamber at the Colonial War Memorial (CWM) Hospital. There are so many things around that need to be fixed or added to, but we cannot afford because we do not have the money. Hospital pharmacies are under-stocked and the police have lost $700,000, which has been transferred to other ministries.

Sir, we need to keep that $8 million. The embassy will still be built, the $8 million is a small change for the super power. They will not go away. Let us all be cognisant of the fact that this particular embassy also brings with it a lot of risk for our people and the country. Of all the embassies and consulates in Fiji, why it that the US has to house itself in a non-destructible shell and then it does not trust our construction companies. I say; "give us your structural plans, Fiji has the brains to build every shape and form of structures".

Mr. President, Sir, in 1996, the then American Ambassador, Mr. Gavitz, had assured Fiji that with the country on its way to normalcy after the 1987 coup, in every sector, we would expect flood of investors and to accommodate the increasing number of American tourists to this land, additional US carriers will be flying into Fiji. In actual fact, what happened was that, the American airline that was flying into and through Fiji slowly discontinued their services. Americans will be here today, gone tomorrow.

Ambassador Osmon Siddique (another US ambassador), made an observation in 1999 that the Americans' presence in the South Pacific will be scaled down because of the shrinking economy and fire power of the USSR. They quickly modified their plans when growing economies like China and India, began to look at the South Pacific for trade and expansion. Now, the current advisor's advice to our military has not gone down too well. At this point, I might even suggest to the Ambassador to take a break and have a look at his own army, their involvement in their country and the havoc they are causing in other countries of the world.

Sir, Loftus Street has been out of bounds for the public and for the ratepayers of Suva City. Once again, this is for security reasons. What guarantee do we have that sections of Princess Road (in front of the new Embassy building) will not be closed at some future date for similar reasons?

Finally, Sir, we have not seen the structural plans. I hope it is not a twin towers-type of structure. We do not want buildings or owners of buildings that will attract pilots who fancy crashing into towers. We do not want someone who may, at some future date, use our country to hold dangerous precedence in non-destructible shells, nor should we allow construction of chambers for visitors like Osama Bin Laden and members of the Hizbollah group. Let us not be likened to the poodles of George Bush.

With those few words, I do not support the Bill.

HON. SENATOR RATU J.L.S. BOUWALU.- Mr. President, Sir, I beg to say a few words on the Bill before the House.

Sir, we have heard from the briefings of the mentioned Bill, the investment and employment benefits that this amendment will bring to our country. I believe that few honourable Senators of this august House, who have spoken earlier on the Bill have raised questions based on various issues, ranging from the state of our balance of payments, alleged lack of funds for capital projects, the economic might of the US, abuse, lack of good governance and living beyond our means, to mention only a few.

I also believe that a few honourable Senators are inquiring for information on the Vienna Convention and its direct relationship to the Bill that is before us. Sir, Article 23 of the Vienna Convention depicts, and I quote:

"The sending State and the head of the mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as represent payment for specific services rendered."

While it is legally correct to argue that VAT is payable under the conditions laid down by the Vienna Convention, some honourable Senators have completely misrepresented Government's objective in respect of the Bill before us. Some have stated that the passage of this Bill will mean the loss of Government revenue of $8 million being VAT refund in 2007 and 2008.

Mr. President, Sir, we should consider the fact that this project will involve an investment of about $60 million in the local economy, and the employment of a considerable number of our very own people.

Mr. President, Sir, unfortunately, most of the criticisms we have heard are based on misrepresentation and misunderstanding of the main purpose of this Bill. This Bill will not empower foreign embassies in Fiji to stop paying VAT. They will pay VAT as normal. What the Bill does is to ensure that with the construction of office and resident complex for foreign embassies, they will be eligible to claim for the VAT payment. In other words, this is an incentive measure to allow foreign embassies to invest in the purchase of land in the construction of their own office complex to provide employment during construction and other benefits to our local economy from such activity. This incentive measure is not new.

Right now, to support investment in the construction sector, Government has a policy to extending its accelerated depreciation on buildings from 2007 to 2010. However, foreign embassies do not qualify for such benefits. Therefore, their ability to claim VAT on new construction is only a very small incentive compared to the benefits that Fiji gets annually from these missions.

Mr. President, Sir, the US Government is a world leader in providing assistance to us, through various bilateral and multi-lateral funding agencies. In 2006 alone, the amount of aid that Fiji is expected to get from these bilateral sources is $67 million. On top of that, a lot of our people are employed in various capacities in the US, and total remittances in 2004 have reached $300 million, equivalent to seven per cent of our Gross Domestic Product (GDP).

Our construction sector is expected to grow by 2.96 per cent in 2006 with private sector projects, including the construction of the United States Chancery. All these activities, Mr. President, Sir, will contribute to the growth of our economy by an estimated two per cent in 2006.

Mr. President, Sir, I beg to reiterate what a previous speaker from this side of the House had stated and that is, when big and powerful nations like the United States decide to invest in the construction of its office complex; that is a big vote of confidence on our nation. This confidence was reflected in last month's first overseas bond issue by Government. Such $150 million bond issue was fully subscribed and a substantial part of it was from the United States financial market.

Mr. President, Sir, there is a famous saying that a friend in need is a friend indeed. Diplomacy is about scratching the backs of our big brothers, and they also scratch ours. I believe that the honourable Senator Ratu Buaserau had alluded on this, but from a totally different angle, accordingly to his right of opinion.

Mr. President, Sir, the Bill before us is more than the miserly consideration of a $8 million VAT refund as some honourable Senators have tried to make out.

Sir, Article 22 of the Vienna Convention states that the receiving State shall either facilitate the acquisition on its territory, in accordance with its laws, by the sending State of premises necessary for its mission or assist the latter in obtaining accommodation in some other way. We, as a nation are obliged to facilitate the acquisition or, in other ways, in the building of office premises of foreign embassies in Fiji. By this act of providing for the refund of VAT, Government is going a step further in reassuring our American friends that we are here to assist you, in accordance with our obligation.

Mr. President, Sir, Article 23 of the Vienna Convention places a special duty on our Government to take all appropriate steps to protect the premises of foreign embassies against any intrusion or damage and to prevent any disturbance of the peace of the mission or impairment of its dignity. It is very sad indeed that some honourable Senators of this august House have chosen this high forum, to make statements which have bordered on a diplomatic faux pas and which have served unfortunately, to impair the dignity of the American Government and the United States Embassy.

Mr. President, Sir, with the amount of detailed research work that had gone to some honourable Senator's contributions, I wonder if they had bothered to first take the trouble to clarify some of their problems with the Ministries concerned. It is always being the norm to come up with the finger pointing tactic, and we heard a few honourable Senators, who have spoken earlier on the Bill, referring to the honourable Minister for Foreign Affairs to introduce the Bill and not the honourable Minister for Finance and National Planning.

Mr. President, Sir, I believe most Members of this august House were at the 2006 National Economic Summit that was held last week at the Tradewinds Convention Centre in Lami. On the closing address of the honourable Prime Minister, he clearly mentioned that investment in our dear country is steadily increasing as it has gone up from 11 per cent GDP to a new figure of 18 per cent; and even the contribution of private capital to this new figure of 18 per cent is also growing from three per cent to eight per cent. The honourable Prime Minister also stated that our target GDP should reach 25 per cent, and this is achievable.

To this, I wish to convey a phrase from the honourable Prime Minister's closing address when he said, and I quote:

"Judging by the substantial projects under way and those at an advanced stage of planning, we can be sure that we have a very good chance of reaching our investment targets within the Plan period."

Mr. President, Sir, in accordance with the addresses given by the honourable Prime Minister, the Governor of the Reserve Bank of Fiji, and the honourable Minister for Finance; I am bold enough to say that the Bill before us is part and parcel, and also within the package of reaching our investment target of the 25 per cent GDP. We have been assured by the three mentioned gentlemen and their respective offices, that we will reach our GDP target in the very near future.

Mr. President, Sir, I wish to state that embassies and high commissions have another good reason to build their own office complex; and that our Government has a good reason to assist the diplomatic community in building their own complex.

International law and practice requires that governments protect the security and dignity of the official representatives of foreign countries as stated in Article 22, No. 2 of the Vienna Convention, and I quote:

"The receiving State (in this case Fiji) is under a special duty to take all appropriate steps to protect the premises of the mission against any intrusion or damage and to prevent any disturbances of the peace of the mission or impairment of its dignity."

The September 11th, 2001 terrorist attacks in the United States ushered in a new era in the protection of diplomatic and consular missions. The missions of a number of countries represented in Fiji assumed an elevated profile as potential targets for terrorist attacks. Also, since the attacks on the United States diplomatic missions in Kenya and Tanzania, our security forces have had to close down a whole street in downtown Suva, where the US Embassy is currently located.

Mr. President, Sir, we live in troubled times, with terrorist attacks an ominous reality. In going through the internet on the US Department of State/Protecting the Diplomatic Community, I then found a phrase, which reads, and I quote:

"We have learned through tragic experience, terrorism can strike any target, at any time. It is more urgent than ever that we operate in an atmosphere of mutual understanding to actively defend against international terrorism. By establishing and maintaining open lines of communication, we can work together to provide a secure environment for the daily conduct of official business."

Mr. President, Sir, the security consideration is very important for diplomatic and consular missions and their staff.

Our police and security forces contribute a large part of their effort to providing protection to the many consular posts in Fiji, of which we should devote particular attention to the protection of the dignity of diplomatic missions, which is an important aspect of the Vienna Convention on Diplomatic Relations. We should welcome the move by diplomatic missions to build their own office complex, as it will improve their security and assist in our Government's obligation to protect the security and dignity of representatives of foreign countries.

Mr. President, Sir, as mentioned by the honourable Vice-President of the Senate, the exempting of the $8 million VAT with regards to the US Embassy, Fiji will also benefit in reciprocity when we build our own complex in the US. Apart from this, maybe, we should ask ourselves in this august House; how is our ambassador and embassy in the United States of America through all these years were so secure in terms of protection and security? We must not forget that we are talking about the world's most targeted nation from terrorists. I reckon that no Members of this august House can answer this question, in terms of the factual and high level magnitude of security.

Mr. President, Sir, I would like to share with my fellow honourable Senators an article from the United States Department of State on Protecting the Diplomatic Community, which was released by the US Bureau of Diplomatic Security in April, 2002. It says and I quote:

"When the Vienna Conventions on Diplomatic Relations and Consular Relations were signed, they specifically provided for the extraordinary protection of all foreign officials residents in the United States.

Within the Department of State, the Bureau of Diplomatic Security Service has the primary responsibility to ensure that protection is extended to all foreign officials and their missions across the United States.

Special agents of the Diplomatic Security Service in Washington and 22 other cities throughout the United States are available at any time to provide liaison services and security assistance to all foreign officials residing in the United States."

Furthermore, an article on the Protective Security Assistance from the same US Bureau says, and I quote:

"To provide foreign missions with protective security, the Protective Liaison Division works very closely with the US Secret Uniformed Division. These uniformed officers provide protection to all foreign missions in the United States 24 hours a day, seven days a week. With a sophisticated communications system and a patrol response capability, officers can respond within minutes to any call for emergency assistance from a foreign mission."

Mr. President, Sir, this is what the United States of America (USA) is doing with respect to top level security to our Embassy in the US, since our first day of set up. I strongly believe that all the services provided so far by USA, is far more than the dollar value, as we trot down the lane of bonded relationship between Fiji and the USA.

Mr. President, Sir, with those few words, I support the Bill before the House.

HON. SENATOR S.N. SHARMA.- Mr. President, Sir, I rise to contribute to the Bill before the House.

Sir, this Bill will allow embassies and diplomats to apply for VAT refund on newly constructed premises to carry out their businesses. These embassies and diplomatic missions always receive a lot of privileges, such as tax and duty free status and other related benefits, which, no doubt, they deserve. I wish to ask; what is the purpose of this amendment? Are we trying to be a good host at a cost to the people of Fiji?

Sir, this amendment shows no benefits to the individuals living in Fiji. As we all know, 50 per cent of our people are living below poverty line. With effective from today, there will be a new surcharge on our Fiji Electricity (FEA) bill, Fiji Post, and many more to come with high charges. I believe that we are trying to create better relationships with the other countries through the hospitality to their missions. However, I believe there could have been other ways of strengthening this relationship.

Mr. President, Sir, I believe this amendment is being made particularly for the US Embassy, which will start the construction of their new building in Tamavua. Sir, what is the economic benefit of the proposed amendment to the VAT Act? The US Embassy would import all the raw materials from their home country and only use the local workforce to do the construction work. The money for the purchase of raw materials would not be kept in the country.

These are some of my concerns relating to the proposed amendment to the VAT Decree. Sir, there are more that can be said on the amendments (I could keep saying more), however, many of these issues have been covered by my fellow colleagues.

HON. SENATOR K. TAVOLA.- Mr. President, Sir, I rise to contribute to the Bill before the House.

I wish to contribute to the debate for two reasons. Firstly, I am in support of the Bill, and secondly, I wish to provide some clarifications on some of the issues that have been raised in this House. A number of honourable Senators have commented on issues and matters that fall under my area of operation and portfolio. Therefore, I am somewhat obliged to provide some clarifications on that. A couple of my fellow colleagues have asked for specific information to improve the presentation of this Bill, and I would like to do that as well.

I hope that after the presentation, the information I am going to provide and after having considered that, honourable Senators will review the way they look at the Bill and support it.

Mr. President, Sir, the Bill is quite straightforward as explained in the Explanatory Note. It gives effect to the refunding of VAT paid on the construction of Embassy building. However, specifically, the particular point we are debating at the moment, is the new section 70(A), which says and I quote:

"Notwithstanding anything contained in this Decree, a Diplomatic Mission (as defined in the Vienna Convention on Diplomatic Relations, 1961) is entitled for Value Added Tax refund in respect of the initial costs of newly constructed premises of its Mission in Fiji.

It is quite clear that the Diplomatic Mission is entitled to VAT refund. Reference to the Vienna Convention is basically a kind of marginal reference, but what is quite clear from here is that, the Diplomatic Mission is entitled to VAT. We are talking about a measure which is legally sustainable. There is nothing untoward here. It is a practice that is done, not only in this country, but in other countries as well.

There have been consultations between the Ministry of Foreign Affairs, Ministry of Finance and the Solicitor-General. Through their consultation, we have come up with this proposed Bill. Without the amendment to this Bill, the American Embassy or any other Embassy that will construct its building here, will actually pay for VAT. The refund will come from Government, however, it has to estimate that in its budget, to allow the refund to be made. As you would appreciate, it becomes a very complex and unwieldy in the way it is being proposed here, but it is very simple.

The entitlement is quite clear that it is legally sustainable. It is just a mechanism of doing it, thus this Bill to provide that mechanism which is simple. As I have said, we can negotiate the same kind of concession in other countries where we are posted. So, what we have here, is the result of the interactions of the Vienna Convention on Diplomatic Relations, 1961 and the Diplomatic Privileges and Immunities (DPI) Act, 1971 (Cap. 8). A lot of my fellow colleagues have been quoting from both documents.

For the information of all honourable Senators, the DPI Act, translate the provisions of the Vienna Convention to our local legislation. Therefore, both the Vienna Convention and DPI Act, 1971, have to be reference jointly. You cannot just quote from the Vienna Convention and forget about the DPI. They cannot be considered separately and this is why the Vienna Convention is part of the DPI Act as in Schedule One, where honourable Senators have made reference to this.

Mr. President, Sir, the point here is the reference to the Vienna Convention in the new section 70(A), which merely defines the diplomatic missions and is basically what it serves to do. It is not the principal legislation of this Bill, nor the DPI Act of 1971 (Cap. 8) is the principal Act, hence, because of that, I as Minister for Foreign Affairs and External Trade cannot come here to present the Bill. Consultations have taken place and it is right that the honourable Minister for Finance presents the Bill. The main legislation of this Bill is the VAT Decree, it is not the DPI Act of 1971 (Cap. 8), nor the Vienna Convention.

Mr. President, Sir, the question has been posed as to the validity or perhaps, the legality of the Decree, and I am sure my fellow colleague, the honourable and learned Attorney-General and Minister for Justice will comment on the Decree. All I understand is that, I think there is an Act (perhaps an Interpretation Act), which regularises all Decrees. Therefore, all Decrees have the same authority as an Act, and I am sure my fellow colleague will expand on this one.

Sir, for the information of the House, the DPI Act is currently under review. We have the terms of reference for the review and this has been submitted to the Cabinet Sub-Committee on Legislation. The funding will be provided from the Australian Government, which we are very grateful for.

For the information of the House, there are other conventions that have some impact on what we are doing today, and there have been some references to them already. The Vienna Convention on Consular Relations in 1963, gave rights to our own Consular Privileges and Immunities Act, 1972 (Cap. 9) and as I have said, that has been referenced already during this debate. The other Convention on Special Missions, 1961, gave rise to our Special Missions Act, 1962 (Cap. 10).

Mr. President, Sir, the question has been raised on the validity or the legality of what we are doing. What I would like to emphasis here is that, what we are doing is a matter of principle, it is provided for under the Vienna Convention and authorised by our own Diplomatic Privileges and Immunities Act. It does not matter which country we are talking about, it just so happens that the Americans are going to build their chancellery here, others are going to do the same and this Bill is going to apply equally to them.

Sir, it is an obligation under the UN Conventions and we have been signatories to many UN Conventions already. Fiji has always been, over the years, a good multilateralist. We have been very good, we have been active as you know, in peacekeeping in MFO since 1982, in UNIFIL and we are now in Iraq and UNAMI. We are now considering further deployment under UNIFIL II in Lebanon. We have participated under the Commonwealth and even here, in the region - the Pacific Islands Forum countries. That is an indication of our involvement and participation not only at regional level, but also at the multilateral level and because we want to protect ourselves as a good multilateralist. We have also been very good at that.

For the first time, the UN has formed a UN Peace-Building Commission and because of our reputation as a good multilateralist, we have become one of the inaugural members of the Peace Building Commission, so much so, that we are now considering having to put in our application for the UN Security Council in 2011. That again is an indication or our wish to remain a good multilateralist in future.

Mr. President, Sir, for the information of this House, we are currently a member of the UN Security Committee of 24 on Decolonisation, and we will be hosting a seminar here in November. We are also considering taking up the Chairmanship of the UN Committee of 24. A question had been asked on the reciprocity; Yes, we can negotiate reciprocity and in future, it may be automatic in some cases because of the compliance with the Vienna Convention, but in other cases we may have to negotiate.

Trade-offs have also been raised in this House, what we have done to trade-off and get some concessions because we are saving the US $8 million. It is a matter of preference, some countries will want to trade-off and we have done that in the past, in other discussions and debates. My preference, of course, and I do believe that if we extend concessions at any one time, we secure for ourselves an IOU note. We can take full advantage of that in the future, and that will be an advantage for us. We can negotiate to benefit from it in the future.

Mr. President, Sir, the question on why the US, we have heard this morning that the US is the most powerful, the most richest and biggest economy in the world. Why are we extending this concession to the US when the US does not need it? The question has also been made that the US did pull away from the Pacific at the end of the Cold War and now it seems to be coming back. Yes, the US is refocusing back into the Pacific and it did withdraw, to some extent, after the end of the Cold War, but that is behind us.

Other countries have downsized their presence here in the Pacific. The United Kingdom (UK) for instance, is downsizing its presence in the Pacific. They are downsizing their development system and have now pulled out from the membership of the SPC. Now, the US is not doing that, it has now come back to the Pacific to refocus and guarantee its presence here, and I think we should welcome that very much.

The same thing with Canada, the neighbours up North for the US previous governments have kind of withdrawn from the Pacific, but now with the new Government coming in, they are re-focusing back into the Pacific. They are bringing their overseas development assistance to us, and we should nurture that and also encourage it.

The US is a substantial trading partner for us, let us not forget that. We export more to the US than we import, and that does not apply to many of our trading partners, so we have a trade surplus with the US. Just to get some figures here, looking at the trade figures for 2004 and 2005, there has been some decline in our export because of the expiry of the garment quota and I will talk about that. However, it is still quite substantial for the 2004 exports to the United States over $184 million. We import from the US only $102 million, so we have a trade balance, and that was in 2005. For 2004, the trade balance was much higher than last year's because of the decline of our exports to the United States but the point is, the US is an important trading partner for Fiji.

In terms of import, it is ranked fifth and of all our import markets, it is ranked behind Japan. The figures for 2005, again, Singapore was our largest import market, second, Australia and that is quite a change mainly because of petroleum and fuel imports coming from Singapore. So, for the first time, Singapore has not become our main export market and that was the 2000 figures. Thirdly, New Zealand, fourth Japan and the fifth is the United States of America. So, it is the fifth biggest import market for Fiji and even though the exports have been coming down mainly because of the expiry of our garment quotas, it is still very, very much substantial and we look at the breakdown in some of our exports; tuna loins, Fiji water, knitted garments, sugar and molasses, fish, mahogany, taro, cassava, vegetables, corals, woven garments, Pure Fiji products, noni and vanilla, biscuits, coconut furniture and others. While the figures for garments have been coming down, the others are still improving. Fiji water is improving, tuna loins is improving and with the mahogany, hopefully, we will escalate as well on our export performance to the United States.

If you look at tourism, we now tend to look at Australia and New Zealand, as our main source of tourist but the US is a close third, and that is a very important market for the Fiji tourism industry. The tourism industry, as we know, is the biggest industry now, in terms of foreign exchange and the third biggest source of tourists is the United States.

Sir, if you look at key statistics, the figures are there and in some instances, some years the US exceeded the figures coming out from New Zealand and it actually became second source of tourists for Fiji. However, generally speaking, it is No. 3, Australia, New Zealand and the United States. So, again, a very, very important factor to take into account. The investment has been discussed again during the debate and I just want to focus on that a little bit. The figures are exciting, coming out from the United States, investment capital coming out of the United States, mainly in the areas of ICT, in the audio visual.

This morning, we read that the audio visual commission is very thrilled about the development in the audio visual. This year is going to be a bumper year (2006), according to them. So, we have investment coming in the hotel industry, Marriot and Ritz Carlton are going to be here.

On health tourism, we have a proposal coming from the United States involving former citizens of Fiji; Dr. Karam Singh and Dr. Chandra. They, under US Funding, are going to establish top of the range hospital facility that will contribute to health tourism, which will contribute to our tourism sector in general.

The owner of mineral water is an American and they are involved in properties development as well. So, here, Sir, we are looking at $8 million and the honourable Senator Kaloumaira has referred to it. When you look at $8 million, it is an investment for all the range of assistance that we are getting, it is a small investment for a big gain that will accrue to Fiji and all its people.

Mr. President, Sir, the reference to the garment - expiry of our garment quotas at the end of 2004 has been raised in this House. Yes, we have garment quotas under the multi-fibre arrangement and this was implemented under the General System of Preferences (GSP) and those quotas expired at the end of 2004, but the concessions under the GSPs are still there. So, our exports go to the US at every reduced export tariffs.

The point I would like to emphasise, Sir, is Fiji was not the only one whose quotas were removed. A whole range of countries were affected; Vietnam, Bangladesh and other countries much, much bigger than Fiji. They also suffered as a result or because of the expiry quotas. We tried our best to alleviate the problem of expiring quotas. We spoke to the Americans on the possibility of an arrangement similar to the African Growth Opportunity Act, which was extended to some countries in Africa. Unfortunately, the Pacific as a whole, did not have the political clout, as the Africans, so we were not successful.

We tried to convince the Americans, to have some safeguard mechanisms that could be applied, if there was a surge of import, so they could apply the safeguard mechanism and that is where they can protect their own manufacturers. We were not able to get this but China did, because it is one of the biggest exporters of garments and who can compete with China? So, when China exports and the manufacturer in the US felt the pain, they quickly applied their safeguard mechanism.

Mr. President, Sir, we also talk to the Americans on the possibility of this mechanism referred to as the "Qualified Industrial Zone". This is a kind of mechanism, we can declare our garment industry, as a qualified industrial zone and then dockets to an existing Free Trade Agreement, involving the US, thereby benefiting from the concession available under that trade agreement.

We tried to docket to Australia and USA under the Free Trade Agreement but this was not possible because that agreement does not have the provision to allow for a QIZ, to be considered. But the Americans are sympathetic about this and what they propose to do in the future, perhaps after consultation with the US is to have an amendment move in congress, so that it can amend the Free Trade Agreement, to allow a qualified industrial zone to be applicable. So, we have had that commitment from the Americans, I was in Washington a couple of days ago and then we have that commitment and we can look at it.

We are also looking at a possibility to save the garment industry, the possibility of a proposal on "export capacity building programme", and could be considered under one of the existing mechanisms such as the Joint Commerce Commission which has been inactive for a long time. We would like to put that proposal under the Commission, to save the garment industry and again, from Washington, there is appreciative for this kind of proposal. The GSP is important, it will terminate that at the end of the year but we are now all lobbying the US to extend the GSP and we talk to congressman, Henry Hyde, in Washington, the Chair of International Relations Committee to give us an undertaking that the GSP will be extended.

As you know, Mr. President, Sir, most of our trade to the US comes under the GSP. We benefit from the GSP.

Mr. President, Sir, other considerations and points have been raised in this House. Fiji Water is our main export to the US and the statistics prove that this is an increasing export commodity for us.

We have a preferential sugar market in the US. We have a quota which benefits the United States' preferential price, and this has been increasing over the years and again, also for Fiji. The point that we have to make, Sir, is that, Fiji's trade is dependent on preferences. This is why we have to be friendly to our trading partners, because we benefit from their generosity. They give us the preferences to allow us to trade effectively and without those preferences, we are going to suffer as a trading nation, so that is the importance of preferential trade. We are doing it with the WTO, we want to do that with the United States as well, but we have to depend on their generosity - it is the game that we play in the diplomatic world.

Sir, during the debate, some reference was made on the Fiji/US bilateral situation. It is a very substantial package, particularly the defence programme under the Fiji/US Bilateral Programme and we benefit immensely from that Programme. There is an allocation for International Military Education and Training (IMET), and we have exhausted it because we are a good user of that facility.

There is the Excess Defence Article (EDA), the provisions are still there but not exhausted and Fiji is benefitting from that. The Foreign Military Financing (FMF), is another facility under which we can benefit. There is the facility called the Humanitarian Assistance Programme (HAP) under the defence programme.

Mr. President and honourable Members, you may have recently read that the Commander and some of his senior officials went to Mongolia. They went there under the Exercise Facility contained in their Defence Programme, which is part of the Fiji/US Bilateral Programme.

There is another facility that is being proposed, the expanded IMET and that will widen the beneficiaries of this Facility. We have submitted our application, wishing to benefit from that as well.

Mr. President, Sir, I talked about the MFO earlier on. We have provided peacekeeping duties under MFO since 1982, and we are still there. The MFO is under US command and we have put a couple of proposals to them for their kind consideration. One is that, since 1982, Fiji has not provided a Force Command for MFO. We are asking for the first time from the US to give Fiji the opportunity to provide a Force Command.

We are also asking the US to help us with the rate of compensation. We have fatalities, Mr. President, Sir, under the MFO and under its provisions and systems, the compensation rate is determined by the national rate for compensation and not the UN compensation rate. As you know, in Fiji, being a small country, the rate of compensation is pitched at our level. It is not pitched to take into account all the risks that our soldiers or peacekeepers face when they go on their peacekeeping projects. So, what we are asking the US Government is to support us in increasing that rate of compensation, perhaps, to the level of the UN. The UN has a better rate than ours, so we are asking the US to help us on that.

The Americans have helped us under the UNIFIL. For instance, we wanted a higher rate of reimbursement and as you know, you are added to in the problem over the years here. The US helped us to go to the UN to plea for an increase in the rate of compensation, and that was agreed to a couple of years back.

Under UNIFIL II in Lebanon, we are considering participation there, since we participated under UNIFIL I and we are looking at the possibility of participating under UNIFIL II. We have asked the US for assistance as well, apart from direct assistance to us because under the UN now, a troop contributing country has to provide large equipment, in order to deploy its soldiers for peacekeeping duties. We do not have the capital, so we are looking for assistance from our friends abroad. We look to the US, the US has now given us its undertaking that they will approach the Chinese and Japanese Governments to help us in this opportunity to provide the large equipment, so that we can deploy and take part under UNIFIL II.

There has also been reference to our caregivers. We have thousands of caregivers in the US, unfortunately, a lot of them remain in the US illegally. The point has been made to the US several times and what we want to do, is to regularise their immigration status as it is a concern for us. The undertaking that we have received is that, there will be a legislation under Congress to regularise the immigration status of people who have overstayed their immigration visas, and it is mainly directed at the Puerto Ricans and others, but Fiji can benefit from that as well.

Another benefit that we are discussing with the Americans, is our participation under what is called the Millennium Challenge Account (MCA). This is a facility where the US provides huge amount of money to help in our development and nation building. Of all the countries in the Pacific, only Vanuatu has benefited from that, to the tune of $65 million under the MCA.

Mr. President, Sir, we are slightly different from Vanuatu but we have now been given the assurance that we do qualify to be considered under the MCA. We have to go through what is called the threshold programme, in order to determine our eligibility. At least, we have a foothold, Mr. President, Sir, so imagine if we can be eligible under the MCA, there will be millions and millions of dollars coming through to help us with our nation building.

Of course, when it comes to Fiji/US Bilateral, Mr. President, Sir, the Peace Corps and we all love them. They have come back in large numbers and they will be here for a long time.

Mr. President, Sir, what is important with this Bill is that, it will not only apply to the US, it is just so unfortunate that we are concentrating on them, however, this Bill will also apply to all other embassies that are going to build their structures here. For the information of this House, we have a queue of interested countries that want to build their Chancelleries here in Fiji.

China has a land near the China Club and they are going to build their Chancellery there. As you know, China has improved its presence in the Pacific. They recently hosted the Economic Development Forum and they have put aside a large sum of money, RMB$3 million, for the development in the Pacific. So, we want to extend this to China as well.

The European Union (EU) is considering building a Europa House at the Government Training Centre down in Nasese. They are now here for good. A couple of years ago, the question was asked in Brussels; why is the European Union here in the Pacific, when they ought to be in Africa where the needs are greatest? However, they have now come up with a new strategy for a strengthened partnership which they refer to as their Blue/Green Strategy. It is based on sustainable development and environment, which basically means, Mr. President, Sir, that the European Union is going to be here in the Pacific for a long time, committed to the development, not only of the Pacific, but the various member States in the Pacific as well.

New Zealand has also been allocated a piece of land next to the European Union, down at the GTC. New Zealand has just doubled its New Zealand aid because of its desire to help Fiji.

The UN agencies here are also considering building a UN House here in Fiji, and we want to extend to them this concessionary that is contained in this Bill.

Lastly, Mr. President, Sir, our neighbours are also wanting to come here. The Solomon Islands wants to establish a high commission here in Fiji next year, and similarly with Vanuatu.

Mr. President, Sir, I have spoken at length and I do apologise. However, I just wish to provide that information. It was specifically asked and I hope I am convincing honourable Members that what we are doing is a good thing. It will mean greater assistance to Fiji to help us with our nation building.

MR. PRESIDENT.- Honourable Senators, we will now adjourn for tea.

The House adjourned at 10.52 p.m.

The House resumed at 11.40 a.m.

HON. SENATOR T. RICKETTS.- Mr. President, Sir, I would like to make a short contribution to the debate on this Bill. Firstly, may I thank the honourable Minister for Finance and National Planning and the honourable Minister for Foreign Affairs for his earlier clarification and explanation of this Bill.

We are being asked to waive VAT totalling $8 million to the USA. Here we are an under developed country, being asked to subsidise the richest country in the world - something seems wrong here. In my view, there is no logic to this. Do not get me wrong, I am not here to criticise any of the countries that may receive this benefit, I am only arguing against the principle as $8 million is a very small amount to the USA, but it is a large sum to us. Our country just cannot afford to give away so much money. There are many ways that this money could be used, such as poverty alleviation, improvement in health services, employment creation, education, water, roads (we earlier heard that King's Road had been closed because of the poor road conditions) and I could carry on.

The next concern is that, if we do agree, would we not then have to agree to future requests by other embassies and high commissions? The honourable Minister for Foreign Affairs has explained that this will apply there also. There are many other embassies and high commissions that have not built their own chanceries and they too, would no doubt expect it. Australia and the United Kingdom have both built their high commissions in recent years without asking for these concessions. How will our relationship with these countries be affected if we grant this favour to the US? What about the regional and international organisations such as the European Union, which has given a vast amount of aid? Will they also expect it? What about the churches and other charitable bodies? Just imagine what a floodgate of requests this Bill could open.

One of the arguments used in support of the Bill is that the USA is a big contributor to our economy. I am not sure that I agree with this argument, as although the Minister explained that our exports to the US exceeded the imports, a large part of the exports to the US is the Fiji Water. As we know that Fiji Water receive good tax concessions, and is owned by Americans.

The other reason given is that when we do decide to build our own embassy, we will receive reciprocal rights. Sorry, but these arguments are not convincing to me, especially when a large portion of our population, I hear the figure of 40 per cent, being mentioned live below the poverty line. These people still have to pay VAT on some basic food items. So, how can we in all sincerity justify the withdrawal of VAT for a wealthy country? The valid reason for granting this concession might be employment provided for local people, but I understand that in this case only a minor portion of the project would be applied towards local purchases and contracts. It seems that there will be very little economic benefit for Fiji from the construction of this building.

I would also like to point out that we have already given the US Embassy a considerable concession in allowing Loftus Street to be blocked off. This is an inconvenience to our own people, although we do not begrudge this if it is deemed necessary for security reasons. Up until before the honourable Minister for Foreign Affairs spoke, we are not being given much information in support of this Bill which makes it difficult to decide whether or not the request is reasonable. If the USA were prepared to grant us something in return, such as replacing our quota on garments to the US, or legitimising some of the Fiji citizens working illegally as care-givers in the US, then it might be easier for us to support this Bill, and the honourable Minister for Foreign Affairs also mentioned that they are working on that.

Thank you, Sir, for allowing me this opportunity to express my thoughts on the Bill.

HON. SENATOR D. SEETO.- Mr. President, Sir, I rise to speak on Bill No. 13 of 2006 which relates to the VAT refund to the US Embassy. My contribution will be brief, given the very many eloquent contributions by the honourable Senators of this House and a very thorough and professional explanation by the honourable Senator Tavola this morning. The amount of VAT sought as a refund is only $8 million, which is a one-time cost and not as some people might think a re-occurring item for the future. I believe that it is a credit to this country to see a major power, building a substantial embassy in our country. I feel that this is a progressive move with positive benefits to Fiji in the future. This VAT only applies to the professional premises and not to the other buildings or facilities of the embassy complex. This concession, as has been alluded to, can be used as a bargaining chip in future negotiations and bi-lateral arrangements which I am sure the Government is well aware of and can well use.

The reason for the building being done by their own people is due to bad experience in the USSR, I might like to point out, where one of their embassy buildings, built by local contractors was found to be full of bugs and was a breach of their security arrangements and had to be destroyed and completely rebuilt with American resources. It is pointless having protection from external threats when internal security is compromised, which is why the construction method is as explained. Fiji needs as many friends as possible and should not exclude some. We are only a small nation in an increasing volatile and hostile world. There will also be such future arrangements as explained for other embassies, such as the People's Republic of China, New Zealand and others. Might I remind honourable Senators that with the recent $27 million worth of sporting facilities donated by the People's Republic of China, that when their turn comes, will we refuse them?

Touching on a subject that is close to me, tourism numbers from the US which honourable Senator Tavola touched on is substantial. In 2005, 71,000 visitors came from the US, not including business visitors, and our own local travelling residents. They are purely American tourists and is the third largest number of tourists into Fiji behind Australia and New Zealand as per the figures in 2005. I believe with the substantial embassy established here, it would stabilise this market with the facility here to look after its own citizens in Fiji, they would promote tourism better and also as a result trade for that matter. This is also important in terms of our foreign exchange and the viability of our national carrier Air Pacific, which has five 747 services a week to and from Los Angeles from Nadi.

There are many US hotel brands now in Fiji and again my earlier point about having substantial US Embassy here would, I believe, assist in getting more US business and brands into Fiji which would help develop our industry even further. The issue of fair play is addressed in the reciprocity of the arrangement for Fiji and US, should our time come to undertake a similar project on the US soil as confirmed by FIRCA.

I am also heartened to hear that the Fijian Affairs and these arrangements with the Tamavua landowners will be taken care of, Sir, as this is an important housekeeping matter, that needs to be addressed.

Sir, I support the Bill before the House.

HON. SENATOR Q.B. BALE.- Mr. President, Sir, I rise to make a very brief contribution to the debate on the Bill before the House. I will, of course, leave the detailed reply to all the issues that have been raised during the debate to the honourable mover of the Bill. I will try to confine myself to some of the legal or constitutional issues that have been raised by some honourable Senators during the debate.

I was listening yesterday to the debate, although I was not present in the House and I have also listened this morning. I note with interest that a great deal of the contributions are focused on the perception that this Bill is deemed at giving something to the US Embassy specifically, as if we were giving them something they do not deserve.

All the comments that have been made, most of them in relation to that particular aspect of the Bill have been adequately covered, in my respectful view, by the contribution of the honourable Minister for Foreign Affairs. I feel certain that the honourable mover of the Bill welcomed that, so that he does not have to traverse a lot of those complicated issues on foreign relations for our country, in respect of which we all know the honourable Minister for Foreign Affairs is a master.

Mr. President, Sir, in relation to some basic issues raised, may I just clarify, if I may, that the objective of this Bill is not limited to the US Embassy. It was triggered by a request from the American Embassy, but when Government looked at that request, we did so in a much broader perspective. Some of those have actually being raised by honourable Senators who have contributed to the debate on this Bill.

This Bill is deliberately aimed at, as the Short Title of the Bill says in clause 1, when this Bill becomes an Act, it will be cited as the Value Added Tax Decree (Diplomatic Missions-Amendment) Act. It is not going to be called the Value Added Tax Decree (US Embassy - Amendment) Act, because it is not confined to the US Embassy. It is going to be of general application to diplomatic missions generally.

The honourable Minister for Foreign Affairs has very aptly explained why there is a reference in clause 2 of the Bill to the Vienna Convention on Diplomatic Relations, 1961. He said that reference is only made to clarify the meaning of the term "diplomatic missions", as used in this amendment Bill. The shortest way to define it within this Act (because we do not have a separate definition clause for this Bill) is to cross-reference it with the meaning of that term within an existing legislation, which is the executor - the legislation Diplomatic Immunity and Privileges Act, which the honourable Minister referred to.

Now, Sir, a reading of the provisions of the Bill shows that it is a very brief Bill. It will come into force on 1st October, this year and that means, any similar situation that had arisen prior to that date will not be covered, or cannot benefit under the provisions of this Bill, although if this Bill had existed before, they would have benefited under this Bill. So, from that point of view, perhaps the criticisms, observations and opposition against the US Embassy can be understood in the sense that the US Embassy will be the first to benefit under this proposed law.

Let me come to another purpose or objective of this Bill, which also goes with the logic behind the thinking that resulted in the formulation of this Bill. It really started from the general proposition that we have a monetary regime, which is covered under the VAT Decree. Under this Decree, all embassies in Fiji are also covered. They have to pay VAT. The difference is, if they were Fiji citizens, they are able to claim for VAT refund for whatever VAT they have paid. The reason is that, under the VAT Decree, they are registered VAT collectors. You cannot claim refund on VAT that you have paid, if you qualify under the criteria set out in the Act, unless you are a registered VAT collector. Embassies are not registered VAT collectors.

Sir, the application of the refund regime should also apply to VAT, but it does not apply to them only because they are not registered VAT collectors, all other VAT collectors in Fiji are entitled to VAT refund under similar circumstances. So, we were trying to make it fair to everyone, and to that extent, as I said earlier, there is nothing sinister about this proposed provision and there is also nothing discriminatory about it. It is really an attempt to be fair to everyone. If the Embassy was a citizen of Fiji, they would be entitled to claim anyway, for items that are zero rated for VAT.

Sir, when we try to look at how we can manoeuvre our way through that system because they are not registered VAT collectors and they cannot claim refund in the way in which everyone else can for similar kind of situation, then how can you be fair to them?

We looked at a number of options, one of which was looked at by the honourable Senator Ratu Buaserau, to look into the Diplomatic Immunity and Privileges Act, and try to fit in this particular kind of monetary exemption into one of the schedules under that Act, which grants various types of exemptions for diplomatic people. We decided after a lot of discussions that that was not an appropriate option, so we had to come back to the VAT Decree.

In the Uncorrected Copy of the Daily Hansard yesterday, Wednesday, 4th October, 2006, the honourable Senator Ratu Buaserau pointed out why do we have to deal with section 70 of the Act, because that deals only with VAT in relation to residential dwellings. That is correct, and that is also why we are not relying on that section. We are putting this new section immediately after because they deal with the same subject, but it is not about residential criterion. This is about the chancellery of a diplomatic mission.

The only way to do that in terms of legal drafting, is to create a new section. If it was possible to fit this into section 70, then we would have amended section 70 as it exists now. We could not do that, because that deals with another category of beneficiary under the VAT Decree. Therefore, we had to create another one and that is why we call it "70A". It means a new section 71, separate from section 70. It means that it is a completely new section, because it introduces a slightly different regime from the section from that dealt with immediately preceding it, which is the current section 70. That explains why we have dealt with it and made a decision that this is the proper way to go - not under the Diplomatic Privileges and Immunity Act, but under the VAT Decree itself through a new section (70A), which is introduced in this Bill.

We have to be careful that if we should grant it; what are the limitations on that? That is why a careful reading of subclause (2) of the Bill will show that the benefits available under this initiative are confined only to the premises that will be used for official purposes by the Embassy. It is not going to extend to other areas of the Embassy operation, including residential areas or premises for the Embassy's staff, et cetera. Any other area, including taxation that arises out of whatever Embassy's staff do here in Fiji, have to be dealt with under the normal rules that are provided in the Diplomatic Privileges and Immunity Act. There are many rules with a number of Schedules specifying and stipulating a variety of means granting DPI, including immunity on taxation matters.

While on tax, this legislative initiative advocated in this Bill, will not affect taxation issues to US citizens, who are involved with this in Fiji. We have no double taxation agreement with US, therefore, they will have to pay tax like everyone else. That is nothing to do with this VAT. Extension to the US Chancellery, official premises, complex as well as repairs, et cetera, will not benefit under this provision. So, it is a very limited application but more importantly, it is not going to be confined to the US Embassy. It is going to be applied to all diplomatic missions, as they qualify under that term - the Diplomatic Immunities Act. We feel that there is a fair way to deal with what is really an unfair situation in our current law under the VAT Decree. Once we do this, it will be fair to all those who live in Fiji, including those residing and operate here. They are also covered by the VAT Decree. However, unlike everyone else in Fiji who can claim refund, they cannot claim because they are not registered VAT collectors. So, we include this provision, in order to allow them to do that. There is nothing unfair about that, I submit with respect.

There was again another issue raised by the honourable Senator Ratu Buaserau on our retention of the term "Decree" in some of the legislation we have. We have agreed to that. The honourable Senator and other honourable Senators have explained as well, that "Decree" is the term we use to denote an Act of the nation.

Sir, an Act is the principal Act and the legislation made under an Act or Decree are subsidiary legislation, regulations and the lot. We use Decrees to describe an Act which is enacted or brought into force, made or formulated outside of Parliament. Once a Parliament comes into being, that changes into Act. Parliaments only enact Acts of Parliament.

The Decrees are retained for the moment and under section 195(1) of the Constitution, it actually spells out from the time of coming into force of this Constitution, that is from 1997, all laws existing in Fiji, including Decrees, will continue to be enforced except, and then they list them down with the inclusion of some Decrees and Acts. Other than that, all Decrees and Acts which continue to exist or existed at the time of coming into force of the 1997 Constitution, will continue in operation. It will not continue indefinitely.

We are now undertaking a project called "Law Revision". It is the consolidation of all our laws in Fiji, which have been enacted since 1985 because that was the last year we carried out a similar exercise - the revision or consolidation of our laws. I think this term has been confused by some with the term "Law Reform", which is the changing of the law. The Law Revision is the consolidation of our laws, Acts and subsidiary legislation, so that anyone looking for legislation about anything, particularly, an amending legislation of an existing Act enacted between 1985 and the present time, will have to wait and search for it. It is very untidy and we are now in the process of almost completing that process of consolidating our laws - the Revision of our Laws. There is a separate legislation for it.

Sir, in that process, the consolidations will take out all these unnecessary titles. For instance, we are now going to call this the "VAT Decree (Diplomatic Missions Amendment) Act, 2006". Under the legislation that will come out of the consolidation exercise, it will be simply part of the Value Added Tax Act. The Decree and the word "amendment" will go out, and all these details in the Bill will all go out and be part of a composite legislation. At the moment, we have 14 (black) Volumes of our consolidated addition done in 1985. When we have the new ones, those will go out of use. The new additions will probably comprise about 15 or 16 volumes, in view of the number of new legislation we have brought on, and since then, they will comprise the only source of logical form of law that we have in Fiji. Once we have that, you do not have to go and look for amendments. They will all be incorporated in there and all these trimmings that we see in amending Bills, et cetera, will go and the term "Decree" will go with that.

In the meantime, the only other way to do it, would be to take out a stand-alone legislation to amend these titles (Decrees) and turn them into Act. However, we consider that that is not an urgent exercise because since 2001 when the SDL Coalition came into power, we had commissioned a Law Revision for the consolidation of the law to tidy up all these things. That is the explanation for the continuing use of Decree in some of our principal legislation.

Sir, I think I did promise that, I would confine myself to clarification of some of the legal provisions and I apologise if I have not given fair treatment to other points or issues raised by some that might have required clarification. However, I have a strong feeling that most of the contributions have been focussed on - why USA? Why are you giving them this when they are already rich? Then they contrast it with all sorts of examples in our own country, we are poor and we have a lot of poor people, but I think, that is (if I may suggest with great respect), a misconception of what this proposed legislation is all about. In fact, this legislation is trying to create a level playing field, a fair regime on this monetary issue for the nation.

Mr. President, Sir, that is my short contribution to the Bill before the House.

HON. SENATOR H.D. KHAN.- Mr. President, Sir, I rise to make my right of reply. Sir, I am very honoured and in fact, most humbled by the fact that I have, what I might term the "twin towers" beside me - one on the right and left. The twin towers of this august House are the two very capable and eloquent Ministers and both have very adequately covered a lot of what I would have had to unfortunately, dig and research on. I must take the blame for having asked the honourable Senator Tavola to be speaking right towards the end, because I know that he would have covered by doing so, a lot of the other comments made by the other honourable Senators to whom I apologise, but I think it has allowed for a lot of steam to come from every person concerned, basically in terms of what their inner feelings were and that has brought to light many issues that perhaps have been adequately covered by the honourable Senator.

Also, to my fellow colleague the honourable and learned Attorney General, I am very thankful that he is also given us a very strong and powerful legal thesis today, on what law writing capabilities are and what they are supposed to be addressing. I think he has covered the areas that were touched upon by honourable Senators during their statements. At the same time, I would also like to thank other honourable Senators, regardless of which stance they took because this is the House, where we come to discuss our points and views openly. In this respect, we hold dear to us our individual rights to say what we feel and in particular, I thank the honourable Senator Kaloumaira and the honourable Senator Ratu Bouwalu for their eloquent research, in covering other areas, which I also have to cover.

Mr. President, Sir, one of the greatest follies of human life is to be very powerful, strong, tall, rich, handsome or anything and in this case, of course, to be a very powerful nation, you tend to attract a lot of attention, some good and some not good. In this respect, the statements made or levied against the US Government are not unusual because these are the types of statements that you hear and see in the media all over the world. They are too powerful and too rich, they do this and that, and they bully everybody. So, this is not an unusual statement and I think the US Government, with all due respect, is quite used to all these statements and takes it in its normal stride.

However, Sir, in our case, as a country that is so highly dependent on assistance, trade, diplomacy and goodwill of our friends, the US being a very powerful one at that, we have to take this in light of and in perspective to what good it means to Fiji. Fiji, as very eloquently placed on record by the honourable Senator Tavola, has very strong ties to many countries and US is one of the strongest one, in terms of the very many initiatives we are pursuing. These initiatives are for the long term benefit of our nation. The unfortunate case or the unlikely example, as the honourable and learned Attorney-General said, is that the US happens to be the first one to benefit from these exemptions or concessions that we are giving, and as such as a catalyst (so to speak) it has attracted a lot of flak that we are giving. However, being the intention of this Bill and as has been elaborated by other speakers before, a number of other diplomatic missions will be taking advantage of this.

Mr. President, Sir, there is a Latin terminology that is well known to many of us - quid pro quo. In layman's term it means many things, but it can also be related to what many of our honourable Senators have spoken about; "I scratch your back, you scratch mine". However, Sir, when the terminology you scratch my back or quid pro quo is used, it does not mean that you scratch my back and I peel the skin off your back and that is exactly why some of the statements made were leaning towards.

We cannot hold any nation to ransom, in offering any concession or exemption and more so you cannot hold a nation of the magnitude and soundness of the United States of America. You cannot on one hand say; "we are giving you concessions worth $8 million", and on the other hand say; "now you legalise all our illegal immigrants that are living in your country". That is holding a gun to the head and does not in any way differentiate between us and the other illegal and blackmailing activities that we hear about all over the world. However, there is a way around this, Sir, and the honourable Senator Tavola has mentioned that through diplomatic negotiations and diplomatic juggling and diplomatic cultivations and I think Fiji is very fortunate. We have had a very good record of doing these things with not only the larger nations, but also the regional nations in getting what we want in a much more diplomatic fashion, hence who better than the honourable Senator Tavola to negotiate on our behalf. I am certain the list of items that he has listed for us, will definitely come into fruition and materialise for the benefit of this nation. Whilst we give this concession on one hand, obviously, the favoured bank as many of us know or IOU as the honourable Senator said, is going to clock in our favour and in the long run and the mid term, we should be able to get the benefit of this.

Mr. President, Sir, we very often hear, not only in this particular instance, when we are discussing this Bill, but in other instances when we talk about investment incentives or initiatives, we hear about how much money we are going to lose or we are going to give away. However, Sir, one very important philosophy behind all this investment, exemption or initiative is that, you only give away something when you have it in hand. If you dream about it and it is going to be an apparition, that is all it is going to be. It will not come into fruition until you get that in your hand. The same applies to exemptions in return for investments that we are hoping to move into this country. Until the investments materialise, we do not have anything to give, and the same thing applies to tax incentives. We do not have hotels aid, tax incentives, garment incentives until the investment actually materialises. In this instance as well, Mr. President, Sir, the same applies, unless and until the embassies, including the US Embassy being the first one, actually invests in Fiji we do not have any exemption to arise. They will not be entitled to an exemption and the egg or the chicken situation comes. Will they invest if you do not give any exemption? If they do not invest or you do not give any exemption, you have nothing to lose because you do not have anything to lose anyway. If they do invest, then you obviously have other things aside from the $8 million that you are going to give, that are longer term and much more meaningful to this nation.

Sir, the rich and the powerful countries or companies are because they are wise and they are very, very smart in poising themselves to take advantage of the maximum benefits allowed and the US is no exception. The mere fact that they are asking for $8 million in most of our individual perspective is a very small amount, as a drop in the ocean. But, Sir, a lot of these countries, as a lot of these countries multinational co-operation that come here or any other country also have certain criteria that they need to satisfy. As the honourable Senator had served on large international institutions, they very well portrayed until you meet their culture.

They do not come to you and this is exactly what is applying here. The US is a fine example, many of us have worked for large multi-national that have US-based company and may have been trained and educated by them. Until you meet that criteria and the guidelines, they do not cross the threshold and come to the first-base of investing with you. The money is not a significant issue, the issue is whether you comply with the reasoning, the rationale and the assessment many times to what they call "a sovereign risk". Whether you comply with those criteria, to be able to cross the first threshold to decide whether they want to invest or want to be in your country. This is exactly what is happening in this case. It so happened, as the honourable and learned Attorney-General said that the US happened to be the first of the rank and that is why there is a lot of heat coming about.

This is also very national in many large countries and I am sure the European Union will also feel the same. They want to make sure that the host countries have so many things available for them, before they would invest to such large magnitude. I am sure China which has become quite modern and advanced would also have the same hurdles that they need to cross.

Sir, I think a lot of statements are coming from all sides, and they have largely supported the fact that we need to do these things, despite the fact that there are local situations and we all agree with the poverty situation and with the fact that $8 million goes along way.

Sir, my humblest summation is that, those statements that have been made which are negative, to me, spell out that we are trying very hard to remain poor. We are not trying to make any efforts to advance our position, we are not trying to make any efforts to accept that you give a little, you expect more. This is exactly what we are doing. We are a small country in a very large ocean of big time players and we are doing a little to try and make sure that those big time players view us as equal partners in each and every respect. In this respect, we are no man in an island and no nation definitely is by itself and we have to play in the international arena, so that we can be part and parcel of the larger global community that is coming more and more reality.

Sir, with those words and the support given by other honourable Members, I commend the Bill to the House.

Bill reported without amendments, read a third time and passed. (Act No. of 2006).

That a Bill to amend the Income Tax (Amendment) (No.2) Bill, (Bill No. 14 of 2006) be read a second time.

HON. SENATOR RATU J.L.S. BOUWALU.- Mr. President, Sir, I beg to second the motion.

HON. SENATOR H.D. KHAN.- Mr. President, the short title of this Bill, is the Income Tax (Amendment) (No.2) Bill, 2006.

Mr. President, Sir, section 2(b) of the Act is deemed to have come into effect or enforced from 1st September, 2006. Section 21(1) of the Income Tax Act, Cap. 201, is amended to -

"(ze) one and one half times the amount of cash donation made by a taxpayer between 1 September, 2006 and 31 October, 2006 towards the organisation and sponsorship of the 3rd Melanesian Arts and Craft Festival 2006."

Mr. President, Sir, for the development of sports, a 200 per cent tax deduction has the minimum threshold of $200,000, as explained during our briefing session by the officials of FIRCA. Whilst on the Melanesian Arts and Craft Festival or the 150 per cent tax deduction sought, the minimum threshold is only $5,000.

The first portion of this amendment, Sir, has seeks to extend the date on the sporting deduction from 31st December, 2006 to 31st December, 2007.

Sir, sports have very important influence on this nation of ours. It gives impetus to an expending and improving sporting talent in this country. Many youths have joined well known clubs in the international arena in sports such as rugby, soccer, et cetera. The extension, Mr. President, Sir, being sought from 31st December, 2006 to 31st December, 2007, will allow for sponsorships needed for many sporting events which are to take place in the year 2007.

The first one, Mr. President, Sir, is the World Netball Championship which is to be hosted by Fiji in July, 2007. Then, of course, the much talked about and anticipated World Club Rugby to be held in France in September and October, 2007 and the regional one, Sir, which we last hosted ourselves in 2003, is to be now held in Samoa (South Pacific Games) in September, 2007.

Mr. President, Sir, the World Netball Championship may cost upto $3 million, however, this is the first time ever for Fiji to be hosting a world sports championship. We have been doing regional ones, but this is the first time one of this magnitude, attracting players from all over the world on a first level sporting arena, will be held in Fiji. This is an opportunity for Fiji to showcase and to take the benefits that arose out from there.

The net benefit, Mr. President, Sir, to Fiji are estimated to be in the vicinity of $8 million to $10 million directly, plus of course, the other spin-offs from the teams that will be present here, the supporters, fans, professionals and of course, other economic multiply effects that happen thereafter. Notwithstanding all these, Sir, there will be the goodwill and the placing on the world map of Fiji's sporting people.

Turning now, Mr. President, Sir, briefly to the Melanesian Arts and Cultural Festival, I quote the statements made by the honourable Minister of State for Fijian Affairs in the Lower House, and I quote:

"Fiji is hosting the 3rd Melanesian Arts and Cultural Festival from 2nd October to 11th October, this year. This is in keeping with a decision by the Melanesian Spearhead Group of countries to hold such a festival every four years. The first was hosted by the Solomon Islands and the second by Vanuatu.

The main objective of this Festival is to preserve, protect and promote indigenous Melanesian cultures and traditions, and for the Melanesian countries to look to each other for support, in maintaining and promoting their traditions and cultures.

The vision of the 3rd Melanesian Arts and Cultural Festival that is being organised now is to produce and Arts and Cultural Festival that best showcases the beauty of Melanesia. All activities that are being planned for this Festival are directed at the theme: "Living Cultures, Living Traditions."

Mr. President, Sir, the incentive window for this 150 per cent deduction to be in place is a very short-term one, which is from 1st September to 31st October, 2006 and rightfully so, Mr. President, Sir, because this Festival is happening right now as we speak.

Government had set aside $1.4 million in budgetary allocation, but now recognises that much more is needed, perhaps, more to the tune of $3.2 million is now required to fulfil the needs of this Festival. Organisers of the Festival, Sir, have identified sponsors of upto $1.5 million, but these sponsors need this tax incentive to activate the sponsorship benefits that will accrue to them.

Sponsorship, Mr. President, Sir, is in cash and kind. Examples of some of the services in kind are the provision of transportation, building and structures, et cetera. The 150 per cent tax rebate on sponsorship is needed to generate these funds and the services in kind.

Mr. President, Sir, sponsorship, be it either for sports or cultural activities, such as the Melanesian Arts and Cultural Festival, if not available, will place direct responsibility on Government, hence the taxpayers footing the bill. We cannot ignore the sporting and cultural needs of our people, as they serve to make us healthier, safer and a united society. Bonding comes because of such activities and initiatives. This is much needed, not only in Fiji, Mr. President, Sir, but in the world today - the bonding of people of different cultures, backgrounds and traditions.

Once again, Sir, we do not live in isolation, as an island nation. We have to participate in regional, as well as international relationship, building initiatives and also, allow our citizens to display their various talents and capabilities.

MR. PRESIDENT.- Honourable Senators, I intend to adjourn the House for lunch and resume at 2.30 p.m.

HON. SENATOR RATU J. YAVALANAVANUA.- Mr. President, Sir, I rise to make a short contribution to the Bill before the House. The Objective of the Bill is to extend the 150 per cent tax deduction provision for the development of sports to 31st December, 2007. It is a fact that we need money to develop our sporting facilities and the main sporting talents that God has blessed us with.

We are a nation of sporting people. We are currently the world's sevens champion. With limited financial resources that we have, we have produced sporting champions such as Serevi, Sivivatu, Tuqiri, Caucau and Rokocoko, which have become household names in international sevens and 15s rugby. Our golfer, Vijay Singh, has gone on to be the golf's world champion.

Mr. President, Sir, we have a large pool of sporting talents, which need to be revived. With enough money, there is no doubt, that we can produce even more sports people. This provision has done a lot to secure funding from our own business people for the development of sports in this country. It has enabled Vodafone Fiji to sponsor our Fiji Rugby League Team and Digicel to sponsor our Sevens Team.

Mr. President, Sir, so many things have been said about our national rugby team. I am a firm believer, in the fact that given the finance, we will be able to meet and overcome the very best rugby teams in the world. So, we need to allocate more for the development of sports and accordingly, we should also support this Bill.

Mr. President, Sir, many other firms have come forward voluntarily to support sports in this country and they deserve to be helped. Giving them a tax rebate as allowed for in this Bill, is a good way to help our private sector help our sports men and women.

HON. SENATOR A. KALOUMAIRA.- Mr. President, Sir, I rise to contribute very briefly in support of the Bill before the House, to express my appreciation of the invaluable contribution of the social service sector to nation building in Fiji, and urging reciprocity support from Government.

Sir, sports is a social service, a strong pillar for family, community and nation building. Additionally, in Fiji, we are proud of our heritage in all its composite culture, with its mirage of cultural dimensions, rooted in Asian, European and Pacific influences.

Sports and culture remain steadfast as strong binders of our multicultural society. These cultures are, in themselves, pillars of community dynamism. It spills over to also influence stability in our economic and commercial sectors, including culture in workplaces.

Sir, from the briefings conducted by officials of FIRCA and IMF, FIRCA has advised against such a policy as framed in this Bill. That, Sir, I believe is strongly from an economic perspective, and in our effort for national reconciliation, we need to show that we care and can respond positively to the social yearnings of our society. These are bound with activities that contribute a lot towards meaningful engagement, particularly of our youths, because with positive outcomes, they have heightened community spirit and togetherness.

Sir, a typical example is the recent inter-island rugby tournament where the whole islands energised all the phases of preparation and participation. We from the Lomaiviti Islands do enjoy this annual event of community engagement, bridging those in the islands with those of us who are in Suva, and I am sure the same can also be said of the other participating communities.

I believe, Sir, that engagement in such a manner contributes to keeping our youths off the street and away from prison. Hence, Government support to the 3rd Melanesian Arts and Cultural Festival is a signal, which must be welcomed and appreciated, that it treasures and identifies the vibrant multicultural society and its valued outcomes.

Sir, the rugby sevens tournament started on a small scale and has grown to a major international money spinner for host countries. It is up to us, the stakeholders, and how we collectively nurture and market social sector activities, that will determine the progress of growth in these developments into self-funding modus operandi.

Whilst thanking the Government in encouraging private sector investments in sports and culture, I strongly urge that Government take up in its Melanesian Spearhead Group Meeting, strategies with masterplans to transform this sub-regional art and cultural activities into stand alone fully funded events.

In conclusion, Mr. President, Sir, whilst I support the Bill I must raise that this Bill illustrates clearly the unsatisfactory situation that our level of investment in the social sector is still very small and fragmented. I do urge the Government to take the lead in assessing the means that are within our nation so as to have a more structured, systematic approach to investing in the social sector.

HON. SENATOR G. AHMED.- Mr. President, Sir, I rise to briefly contribute to the Bill before the House. Looking at the Bill, and amendment to the Income Tax Act, I am not against the system given to the sporting bodies, even to the Melanesian Arts and Cultural Festival. I thank the Government for organising the 3rd Melanesian Arts & Cultural Festival in Fiji to recognise the many Melanesians in the South Pacific. However, I am against the manner in which this particular funding is given. I will illustrate and give reasons for my observations.

First of all, Sir, when I look at the clause on extending the time for sponsorship for sporting bodies, the Bill itself indicates and tells us that the institute or agency (FIRCA) is incapable of collecting tax as per the Act. The Bill also indicates that FIRCA failed to collect taxes from all those who were supposed to pay taxes, and that the officers in FIRCA were not doing their job (the Bill indirectly saying this and that is how I look at it). However, let me tell this august House that through the records and reports that I have been going through, Sir, I can see that FIRCA is doing a good job after the reforms have been undertaken. I can see an increase in tax collections in all areas. Despite the fact Government (at this point in time) owes $30 million to FIRCA as VAT and also other tax areas of $122 million, I am sure, by the end of time of collection of this debt, FIRCA will be there to see that all dues will be received by their office. However, Sir, FIRCA also discourages this policy of the Government. FIRCA also announced that this policy will see those in a stronger position (business entrepreneurs), some of them will benefit.

The Government and FIRCA will be on the losing side and let me give a scenario, Sir. For example, sporting bodies, especially the Fiji Rugby Union and Netball Fiji, if they receive a total of $10 million from business entrepreneurs as sponsorship; how much is FIRCA and the Government going to lose on a 200 per cent tax exemption or incentive given as per the Bill? Government tends to lose $10 million because they are companies. I do not blame the honourable Minister for Finance and National Planning (a very good friend and humble person), it is the financial advice that was given to him to bring this particular policy into existence, so that some business tycoons will benefit from this particular policy. There are some outside this House who were looking forward, by taking advantage of this particular policy of evading taxes.

What I thought, Sir, if Government (with a better policy than giving tax incentives for sporting sponsorships), through FIRCA should have asked all these people pay their taxes which is due to them and whatever money is derived as taxes to Government revenue, Government in their annual budget should have distributed certain provisions to these sporting bodies rather than coming the other way around and telling the people or business entrepreneurs; "look if you really want to assist us, you assist us this way, and we will assist you this way". Something must have transpired somewhere before this particular policy came into existence, and I was really shocked to see the extension of time when this particular policy was brought in as a Bill in the Lower House where I also echoed the same sentiments that I am giving today. Government is on the losing side. By giving these tax incentives to the business community or to the people to sponsor sports, Sir, the Government will always be on the losing side.

When I say this, Sir, I am also referring to the decision of the International Monetary Fund (IMF). Their advice was that this particular policy will not do anything good for the economy of the country. These were the advice given for this policy by FIRCA and IMF. Despite these advice, still the Government thought fit to formulate this particular Act and then see people take advantage of it. I want to be on record, Sir, to tell the Government that we are on the losing side. I am sure, come 2007, this particular incentive will go out. But then again I ask the Government; I know they have the numbers and will go through with this Bill, but after next year, they should get away with this particular system because our neighbouring countries do not have this particular incentive for 200 per cent tax rebate. This percentage is so great and when one talks about millions of dollars, there are companies who are supposed to pay $2 million as tax, they pay $1 million to FRU or Netball Fiji and they save $1 million.

Then there is a ceiling of $100,000 and above. If a small business entrepreneur wants to invest or assist on a $10,000 sponsorship, he will not be allowed to do that because the ceiling is $100,000 and above. I thought there would have been a group sponsorship; three or four companies forming a group and then sponsoring these sporting bodies. That would have been another way of assisting the small businessmen. This particular Bill will only see that the rich get richer by evading taxes and the poor will still remain poor, and those small businesses who would want to be in the system, would want to get some tax incentives will not be able to get assistance.

On the second clause, that is 150 per cent tax incentives for the Third Melanesian Arts and Cultural Festival, which is being held at the moment. It was well planned and I am surprised that funding for this particular Arts and Cultural Festival is asked at the time when the Festival is being held. I thought this particular Bill should have come to this House during the January/February, so that there is ample time.

The costing is also questionable. Initially, the costing was $1.4 million and then later on, it increased to $3.2 million. I want to put this on record and also thought that I should share this with all honourable Senators.

Lastly, I sympathise with the death of one of the Vanuatu participants, who died whilst being on the stage during the opening of the Festival. I am amazed of the way the media covered the death of this person. They blamed the poor hospitality of our country. I ask the media that this kind of unforeseen circumstance should be reported fairly accurately than just blaming our country without any reason. Maybe, this person died because of dehydration or undergoing extra training for the Festival, but our country should not solely be blamed.

HON. SENATOR K. TAVOLA.- Mr. President, Sir, I wish to contribute briefly in support of the Bill. I just want to concentrate on sponsorship and support that have been given to the tax incentive for the Third Melanesian Arts and Crafts Festival.

I am very supportive of this because I think we all want to support art and culture, and as we know, the Festival is currently underway. I am sure we would all want to thank the National Director and his team of organisers for the Festival. We also want to express our gratitude to the honourable Minister for Fijian Affairs, Lands and Provincial Development and the Ministry for all their work in the planning, preparation and now the organisation of the Festival.

Our fellow colleague, the honourable Senator Ahmed mentioned the untimely death of the members of the Vanuatu Cultural Group, and I am sure that we all want to join him to express our condolences to his family and all members of the Cultural Group Ni-Vanuatu. We also commend the Group for its decision to continue their performance, notwithstanding the tragedy.

Sir, by way of background on the 3rd Melanesian Arts and Craft Festival as we have heard also, the idea has been growing for a number of years. The idea that Fiji is to host the Festival was first conceived in Gizo, Western Solomon Islands, at the 15th Melanesian Spearhead Group (MSG) Summit, that was held there in 2003.

At the 16th MSG Summit in Goroka, Papua New Guinea, that was held last year, the Communique of that Summit reads, and I quote:

"Fiji's agreement to host the MAF in 2006 was noted. It was agreed that members will await Fiji to revert to them on the details that will facilitate their preparations."

After that, the process of Cabinet approval was sought and Cabinet gave its blessing, and all parties were notified. At the sixth MSG Foreign Ministers Meeting held in Port Vila, Vanuatu in March of this year, the Outcomes of the Meeting stated, and I quote:

"The meeting commended Fiji's preparations for the festival which will be held from 2-11 October 2006 in Suva to coincide with Fiji Day celebrations. The theme is `Living Culture and Living Traditions'."

Honourable Senators may ask about the MSG and its status. MSG is a very important grouping in the Pacific. At the Gizo Summit in 2003, leaders decided that the MSG was going to be a lot more relevant and responsive in its work and image to the Pacific as a whole.

The theme continued to be discussed at the Goroka Summit of last year. A lot of the activities of the Group now do confirm that they are really trying to be relevant and responsive. There is now an enhanced MSG Trade Agreement. There has been an MSG Trade Agreement for sometime, but now we have agreed to new provisions to be put in so that the application of the Trade Agreement would be a lot more effective, and that an enhanced Trade Agreement was signed by the leaders in Port Moresby during the 2005 Forum Leaders Meeting in the country. Now, a number of committees meet regularly, including the one on security in the MSG countries and in the region as a whole.

The Group is really trying to be relevant and responsive, and I do welcome the view that has just been expressed by the honourable Senator Kaloumaira, for the Melanesian Arts Festival to become a stand-alone and to be a lot more forceful, assertive and to create that image of independence. I welcome that view and one that I will certainly take on board in the discussions of the MSG Leaders. As it needs to be relevant, it has agreed to establish a Secretariat and this will be located in Port Vila. Financing is underway and work will start very soon.

The MSG Constitution is currently undergoing ratification process. The current Chair of the MSG Summit is PNG. The next meeting of the MSG Leaders will be in Nadi on 20th October of this month, before the Forum Leaders Meeting on 23rd to 27th October, 2006.

HON. SENATOR S. SHARMA.- Mr. President, Sir, I wish to make a brief contribution on the Bill before the House.

Sir, this Bill, which looks at amending section 21(a) and (b) of the Income Tax Act, that is further increasing the timeframe for the deduction of 200 per cent income tax for sports developments to December 2007 and the 150 per cent income tax deduction for the sponsorship of the Third Melanesian Arts and Craft Festival, which is currently being held in Suva.

Sir, if there was wiser planning done by the Government on the use of public funds that are being allocated in the budget, there would not be any need for such amendments that seek more funds from taxpayers. Taxpayers of this country have suffered a lot at the hands of the Government as it is unable to keep within its budget for any event or the running of ministries.

Mr. President, Sir, the Government should re-look at some of its current policies in order to reduce this over-spending. Some of the examples of misuse of taxpayers' funds are:

(b) High-powered and large delegations travelling overseas for meetings or visits that could have been attended by a small number of people.

(c) The diverting of ministerial funds to cater for the payment of Cost of Living Adjustment (COLA) to civil servants and an over-sized Civil Service. The Government needs to seriously consider right-sizing the Civil Service as it takes up a huge amount of Government expenses, whether through reduction of the retiring age or laying off of workers from ministries that have a large number of staff that may not be required.

Finally, a lot could be done to avoid all the misuse of funds. The Government needs to take a serious look at where they are going wrong and try and solve the problem without requesting for additional funds. These types of amendments give rise to a trend that if the Government needs more money, they will amend the Income Tax Act and get taxpayers to fork out more money for their projects and misuse.

HON. SENATOR RATU K. VAKAWALETABUA.- Mr. President, Sir, I rise to contribute to the Bill before the House.

Firstly, I believe it is important that this Bill be amended since it entails two entities that the people of this nation value - culture and sports. These two entities have made a name for Fiji overseas. We are not only known for the unique culture that we have, this nation is also known in the past to produce some best athletes that have excelled and become professionals in their respective fields. The proposed extension of the 200 per cent income tax deduction from 31st December, 2006, to 31st December, 2007 should be welcomed. This period covers the 2007 which is an important year in our sporting calendar. Apart from hosting the World Netball Championship, Fiji will be represented extensively in major tournaments such as the Pacific Games in Western Samoa, Rugby World Cup in France, our defence of the International Rugby Board Sevens' crown and few others.

Mr. President, Sir, financial support for any sporting event is essential to back the efforts and preparation in order to achieve the best. The lack of support as such in the past has been seen as a hindrance in the maximum utilisation of the abundance of sporting talents that Fiji is proud of.

The same can be said of the 150 per cent income tax deduction for the grant towards the Third Melanesian Arts Festival currently underway in Suva. We, the people of this country should be proud to be hosting an event that is unique in a sense that we are a part of a group of people that desire to preserve, protect and promote our culture, identity and what we are known for.

While staging this festival, our youth will have an opportunity to learn about the culture of our Melanesian brothers and sisters. This will also enable our young people to witness our own culture and customs through dances, art, craft and music which I believe most of them have little knowledge about. Therefore, the grant towards this festival will enable Suva to produce a festival, which best showcase the beauty of Melanesia.

HON. SENATOR H.D. KHAN.- Mr. President, Sir, I think the Bill is fairly simple and right to the point. It is very eloquent in terms of describing what it needs to do. Obviously, from the debate or the lack of it from what has been engendered, it is quite clear that most of the honourable Senators of this House have no difficulty in accepting the notion that both the issues on hand - the extension of sporting allowances to 31st December, 2007 and the 150 per cent deduction until 31st October, 2006, for the Melanesian Arts and Crafts Festival, should be supported by this House.

MR. PRESIDENT.- Honourable Members, we will resume tomorrow at 9.00 a.m. to allow honourable Senators to participate at the official opening of the Fiji Day at Albert Park. The Secretariat has organised a bus to take us to the ground when we rise tomorrow morning.

Meanwhile, the refreshments are being served at the Bure where we will be entertained by the Bua Melanesian Dance Group. I hope to see you there.