The Fiji government’s new five percent Tourism Services Tax (TST) has been criticised by international travel associations.
The Australian Travel Industry Association (ATIA) and the Travel Agents’ Association of New Zealand (TAANZ) say the tax will penalise visitors who have already booked their travels to Fiji.
ATIA and TAANZ have called on the Fijian government to withhold implementing the new tax, scheduled to be effective to take effect from 1 September.
ATIA chief executive Dean Long said the tax would mean a Fiji holiday could become more expensive for Aussie travellers.
The new tax will be in place for large-scale tourism operators and travel industry experts are warning the costs are likely to be passed on to customers.
“The design and rollout reflect a complete lack of understanding of how the travel booking ecosystem works, and it is travellers and travel businesses who will pay the price for that failure,” Long said in a statement.
“Retrospective application is an absolute no-go. Once a customer has paid, that price is locked in. Sending a fresh bill after the fact is not tax collection, it is a broken promise dressed up as policy.”
He said many travellers are being asked to find extra money for a holiday they thought was settled months ago.
“That is not how you treat people who chose Fiji in good faith,” he said.
Fiji remains a popular travel destination for Aussies and New Zealanders, but a new tax could threaten that.
TAANZ chief executive Julie White said travel was routinely booked, contracted and paid for many months in advance and the sudden announcement puts all that into chaos.
“Our concern is simple: travellers who booked and agreed a price before 1 September should not be hit with an additional tax simply because they are travelling after that date,” White said.
“There is a significant volume of existing Fiji bookings where the price has already been agreed, and in many cases the customer has paid in full. Those travellers have every reasonable expectation that their holiday is paid for.
“They should not suddenly be faced with an additional cost because a new tax has been introduced after they made their booking.”
White said the timing is particularly concerning as it comes immediately before the busy September and October school holiday travel period.
“Families have planned and budgeted for these holidays months in advance. There are also group, wedding, corporate and other large bookings where contracts and pricing have already been finalised,” White stated.
“Reopening those arrangements creates uncertainty for travellers. Travel agents, wholesalers and tour operators are stuck in the middle. They are being asked to explain and potentially administer a cost they did not create, could not have anticipated and have no control over.
“At the same time, basic practicalities remain unclear, including who is responsible for collecting the tax, how it applies to net rates and existing contracts, and where a supplier ends and an agent begins. These questions need clarity not only for existing bookings, but for new bookings from 1 September as well.”
TAANZ said the issue is compounded by a lack of clarity around the practical implementation of the tax, including how it will be treated across different types of bookings and existing contractual arrangements
The new tax will apply to tourism operators, including hotels, tour operators and cruise businesses, with an annual turnover above FJ$2 million (NZ$1.4m).
Fiji’s Minister for Finance Esrom Immanuel said the Tourism Services Tax was introduced as part of the coalition government’s broader efforts to support Fiji Airways.
RNZI/Sally Round
Local concerns
The new tax has also raised concerns locally, with members of the business community also voicing their disappointment.
J Hunter Pearls boss Justin Hunter said the government’s decision showed a lack of understanding.
“One really has to question the economic brain trust behind this,” he said in a Facebook comment on the issue.
“It shows remarkably little understanding of how the international tourism wholesale mechanism actually works. Product is contracted, priced and sold months in advance. You cannot simply change the cost retrospectively and assume somebody in the supply chain will absorb it.
“Fiji doesn’t have that sort of leverage. If Fiji becomes too expensive, unpredictable or difficult for wholesalers to sell, they won’t argue with us forever. They’ll simply remove Fiji from the menu.”
Tony Whitton, the managing director at Rosie Holidays and Ahura Resorts Fiji, said they had been in discussions with government line ministries about repealing or delaying the tax to cover those bookings made later in the year.
“The tourism industry (hotels, tour operators, activity companies, marine) have been in discussion with our line Ministry and the tax office for over 6 weeks to either repeal or at least apply the new tax to only new bookings made after 01 September 2026, warning that retroactively applying a tax on an existing contract that is already in place is a breach and there will be push back,” Whitton said.
“So here we are 10 days before implementation.”
Businessman Grahame Southwick questioned the tax idea.
“One wonders if these economic ” super brains ” in Govt even realize that this 5% tax on GROSS turnover can easily represent 20-50% of the profit ??? Am I missing something here?
“What that can translate to is closing the doors for properties than are currently marginal. As for retro charging.. are they serious ??
The Fiji Hotel and Tourism Association (FHTA) said businesses remained unclear about how the new TST would work, with concerns that taxing turnover rather than profit could significantly increase the tax burden on tourism operators, particularly those with smaller profit margins.
FHTA chief executive Fantasha Lockington told fjivillage.com they continue to receive thousands of questions from businesses in Fiji and abroad about how the levy would apply to existing bookings, deposits and transactions through wholesalers and agents.
She said that a resort in the Yasawas had asked whether a booking paid in full in April for travel in October would be subject to the new levy, while a Sydney-based wholesaler wanted to know whether it needed to return to clients who paid deposits months ago and ask for an additional 5 percent.
“The concern is not simply about the additional cost, but how the tax is calculated,” she told fijivillage.com.
Lockington explained that a business retaining 25 percent of its revenue as profit would see the 5 percent turnover tax take a significant share of its actual profit when combined with the existing 25 percent corporate income tax, while an operator retaining 15 percent of revenue as profit, the 5 percent turnover tax would consume a third of its profit, resulting in a total tax burden equivalent to 58 percent of its income.
Government stand
In a statement, Finance Minister Esrom Immanuel said the government was concerned by the continued delaying tactics being employed by the FHTA and a number of industry players in relation to the implementation of the tax.
He said government had engaged with the FHTA and key tourism industry stakeholders since June to discuss the introduction, application and implementation of the new tax.
According to the government, it had also provided the industry with additional time to prepare for the new measure, with the implementation date adjusted from 1 July, to 1 August, and subsequently to 1 September.
“These extensions were provided in good faith to allow the industry sufficient time to prepare its systems, communicate with customers and ensure compliance. Despite this, government is concerned that some industry players, with the support of the FHTA, continue to create negative publicity around the TST and its implementation,” he said.
He said the industry should recognise that protecting Fiji Airways meant protecting the connectivity on which hotels, resorts, tour operators, restaurants, transport operators, cruise services and thousands of other tourism-related businesses depend.
He added, for many years, the tourism industry had benefited from significant tax holidays, duty concessions and other incentives designed to encourage investment and support the development of the sector.
“Many hotels and tourism service providers have received tax holidays ranging from 13 to 20 years, together with various duty concessions and other forms of government support.
“The industry also benefits from taxpayer-funded tourism marketing and other public investments that help promote Fiji as a destination and support visitor arrivals.
“Today, the entire tourism industry contributes only around 5 percent of the total corporate taxes collected by government. The other 95 percent is paid by non-tourism sectors.
“Government recognises the importance of tourism and the investment that the industry brings to Fiji. However, the industry must also recognise that it has a responsibility to contribute to the wider national effort when the country and its critical tourism infrastructure require support.”
He also claimed that under the previous Government, the tourism sector was subject to a combined 16 percent turnover-based tax through the 10 percent ECAL and 6 percent STT, which remained in place for a number of years.
He said the current measure is significantly lower than the previous combined tourism turnover taxes, and it is temporary.
