Comments

I agree Henry. It is too simplistic to point to an increased VAT without looking at the expenditures side, transfers and tax expenditures, and indeed other tax options such as digital services tax. What will be the social impacts of different tax and tax expenditure options.

Hi Peter, while I agree with the need to increase government revenue, I do not think we need to increase VAT. We cannot continue to put extra burden on consumers without controlling the leakages. Those leakages need to be fixed, and we need a holistic review on our current fees and charges. Four decades ago, the government budget was less than 10 billion, yet most of the basic services such as schools, hospitals, airports and etc are up and running. Four decades later, most of them are now in the verge of collapsing yet, the government budget has now increased them by nearly a 1000 percent. Why? The government has received twice, or more aid from developing partners, unfortunately, most of the citizens do not feel that their livelihood has improved. Maybe in papers and reports, but the reality seems otherwise. So, I do not think increasing VAT should be an option.

Thanks Dr Phillip. And I completely agree with what you say here. GDP is just one metric, and far too many of the world's current problems have stemmed from an obsession with growth, often ignoring or forgetting what really matters (health, community, environment, etc.). As just one example, current extinction rates are estimated to be 100 to 1,000 times higher than natural background rates due to human activity. At the same time, country's need a minimum level of wealth/income to be able to provide the basic services to an acceptable standard, and Vanuatu is simply not rich enough. The literature suggests that a GDP/capita of about USD 10,000 is needed for this, and Vanuatu is only 25-30% of that. There is a good argument to be made that the customary economy (which must be preserved) means that this level would be lower in Vanuatu, but conversely the costs associated with geography and natural disasters may mean it is higher. But the main point here is that it is clear Vanuatu is not rich enough to provide these services, and so growth is needed for Vanuatu. But it is not endless growth that is needed - indeed the only thing that keeps on growing is cancer! We must make sure that it is good growth - inclusive and fair to both people and nature. Always happy to talk more over a coffee, and happy biological diversity month 🙂

Thanks Henry. I agree on the need to reduce unnecessary spending and implement public sector reform, but at the same time, I still believe more revenue is needed to a) fund core services (especially education) and investment and b) to improve the business environment to enable investment and growth. Vanuatu is an extremely expensive country to operate in, and the Govt needs revenue. With no income tax, and with citizenship revenue falling, it has to come from somewhere.

Thanks David. Income tax for Vanuatu is a minimum 5 year project to implement, and doesn't solve the immediate revenue issues. The economy is also (in my opinion) too small and the business challenge too challenging for an income tax tax to make sense. Unleash the power of cheap energy (solar + battery), move as much of Government online as possible, resolve the skills issues, let the economy grow rapidly, and then I think it makes sense to introduce a well-signaled income tax.

I'm facing the same problem too.

I'm interested to know more and grow cocoa

This is a great piece by Peter Judge. Peter raises critical points regarding the economic challenges faced by Vanuatu, including the significant decline in government revenue and the impact of the liquidation of Air Vanuatu on VAT returns. His suggestions for achieving rapid economic growth through productive capacity expansion are commendable. However, as we look forward, might I add, it is important to consider Vanuatu's unique strengths and its international commitments to biodiversity. A. Integrating Vanuatu’s Safety Nets: Customary Land as Economic Resilience While boosting productive capacity and foreign investments are important, the resilience of Vanuatu’s economy cannot be separated from the customary land tenure system. Indeed it may be agued that over-reliance on foreign investments exposes the economy. Over 80% of Vanuatu’s land is held under customary ownership, which provides a significant social safety net during economic crises. Access to customary land has historically protected communities during times of economic hardship, allowing them to rely on traditional agriculture and resources. This is a unique form of wealth that is not captured in traditional GDP metrics but plays a critical role in social stability and food security. Judge’s focus on productive capacity expansion should therefore be complemented by efforts to strengthen and protect customary land rights, ensuring that this vital safety net remains intact. Doing so not only preserves social cohesion but also provides an economic buffer against future crises. B. Aligning Economic Strategy with Biodiversity Targets Vanuatu is a global leader in environmental conservation, and any economic recovery plan must align with its role in achieving the Kunming-Montreal Global Biodiversity Framework’s 30x30 targets. These targets commit countries to protect 30% of land and marine areas by 2030, which is critical for safeguarding biodiversity and combating climate change. Intervention on Indigenous Peoples' role in biodiversity, lands managed by indigenous communities often demonstrate better conservation outcomes than state-protected areas. Vanuatu’s commitment to biodiversity conservation is not just an environmental issue—it’s an economic one. Healthy ecosystems provide services that underpin sectors like tourism, agriculture, and fisheries, which are cornerstones of Vanuatu’s economy. Therefore, economic responses should prioritize nature-based solutions and sustainable development that contribute to these biodiversity targets. By leveraging international financing (Green Climate Fund and Biodiversity Funds etc) Vanuatu can secure investment to both protect biodiversity and foster sustainable economic growth. C. Developing Resilient Economies Based on New Definitions of Well-being As the world faces increasingly complex global challenges—climate change, biodiversity loss, and economic inequality—traditional models of economic growth are becoming outdated. It might even be argued that those economic growth models are irresponsible on a planetary scale Vanuatu’s current economic difficulties should be viewed as an opportunity to pioneer a new model of well-being, one that is planetary in scale and based on the well-being of ecosystems as well as people. The Kunming-Montreal Targets emphasize the importance of preserving biodiversity and natural ecosystems. Vanuatu’s economic strategy should thus shift from a focus solely on GDP growth to a more holistic approach that values ecosystem services, social well-being, and climate resilience. This new model would not only benefit Vanuatu but could serve as a blueprint for other nations. By integrating indigenous knowledge systems and customary land practices with modern economic policies, Vanuatu can demonstrate how small island developing states (SIDS) can build robust, resilient economies that thrive within the natural limits of the planet. This would position Vanuatu not just as a participant in global economic systems, but as a leader in redefining what true prosperity means in the 21st century. Summary: While Peter Judge’s recommendations for increasing productive capacity and foreign investment are valuable, they must be integrated with Vanuatu’s customary land-based safety nets and commitment to global biodiversity targets. Furthermore, the current economic challenges provide a platform for developing a new model of economic resilience that goes beyond traditional metrics like GDP, focusing instead on planetary well-being and sustainability. This holistic approach will ensure that Vanuatu emerges not only economically stronger but as a regional leader in sustainable development. Happy biological diversity month:)

We don't need to raise VAT, Just cut unessary spending, implement a public sector reform to strengthen public institutions and improve quality of government spending.

Fiscal consolidation in Sri Lanka since the 2022 crisis has only marginally depended on spending cuts and mostly relied on revenue measures taking tax collections from 7.3 percent of GDP at the low point in 2022 to 9.6 percent of GDP in 2023 and heading to 12.4 percent of GDP in 2024. VAT rates at 20 percent and higher may become problematic. Perhaps Vanuatu should finally move to a more balanced tax system that includes income tax like most countries.

This is a commendable summary about the lives of refugees and positive support of them, in Jordan a country caught between too many local conflicts. I noticed on the banner in the photo that the Australian Government is involved. This article should be presented - forcefully - the Australian media, detailing how refugees live and why Australian aid matters. Not often publicised and the impacts of our aid are too often forgotten.

I have read Kieran's book too and really enjoyed it. I have been to PNG many times myself, so was struck by how well Kieran can paint a vivid image of a PNG scene in just a few words. As just one example, he writes about the character Ellen going towards a local building that he describes as: "a building of native materials on stilts standing over pieces of lawn and beds of bright flowers edged with white stones". Great image.