The high cost of living

Yesterday saw the first session of the new parliamentary term, opened by the Head of State, His Highness Malietoa Tanumafili II. It also saw the 2006-2007 budget delivered by new Minister of Finance, Niko Lee Hang. Amidst the ceremony of the parliamentary opening, it was the budget announcement that really caught everyone's attention.

The new budget sees a number of changes to taxation and pricing. In brief, the major changes are:

• VAGST will increase from 12.5% to 15% from October 1, 2006.
• Excise rates on alcoholic beverages and soft drinks will increase 10% from July 1, 2006.
• Excise rates on tobacco will also be increased from February 1, 2007. The excise on roll-your-own tobacco will increase from $127.36/kg to $185/kg. Excise on cigarettes will increase from $149.18/1,000 sticks to $175/1,000 sticks.
• The tax free threshold will be increased from $10,000 to $12,000. The top personal tax rate and the company tax rate will decrease from 29% to 27%. These changes come into effect from January 1, 2007.

These are not small changes and are bound to have a significant impact upon the cost of living in Samoa. This is already a topic of much concern amongst the majority of Samoans and I cannot see how these new changes are going to be received well. Even worse, these changes were not mentioned by the HRPP during the several months leading up to March's general elections. It makes for pretty disappointing, yet entirely unsurprising politicking. This sort of thing is seen the world over.

The main opposition party, the SDUP, raised the concern of increased excise rates and taxes during its election campaign but with the HRPP remaining silent (ie. outright refusing to discuss their budgetary plans if reelected) they gained little traction on the issue. I have to say that I'm not particularly surprised either. The HRPP's plan for increased excise rates and a likely increase in VAGST would have to be one of the worst kept secrets in government leading up to the election.

Yesterday, the SDUP's response to Niko Lee Hang's budget announcement was a resigned, "We warned you." With the HRPP holding a significant majority in parliament (and note that Samoa has a unicameral political system) it would seem there is nothing any opposed members of parliament can do. With each parliamentary term lasting five years, it's going to be a long time before any of these changes can be contested meaningfully.