Small business owners reeling over withholding tax imposed without notice

Several small businesses on the island are reeling at the sudden application of a 10% withholding tax on invoices to the government for goods and services. Some of the catering businesses are no longer accepting the purchase orders from government departments and will only accept cash up-front.

One of those concerned business owners is Victoria Posimani -Kalauni of Hio Cafe who told BCN News that they feel hard done by the decision of the Tax Office when businesses are still trying to recover from 3 years of the pandemic.

“I felt really hard done by, I felt shafted actually. I looked for information, that maybe Chamber had sent me an email, but there was also no conversations within the small businesses which is what we do. So I messaged a friend who said that yes she’d done some catering for government and she felt really let down.”

“These are still hard times post Covid, we haven’t seen profits even though we look busy, we’re still recovering from and so it’s really important to be informed about these things,” said Posimani-Kalauni.  

Victoria said that some of the catering businesses are now not accepting business from government because of this issue.

“I was told by another local business person that it happened to them too, and that they’re withdrawing from doing some work for government. And this is the risk of doing something like this, of not informing small businesses. You already got kicked through Covid and now you come out of it, you know thinking there’s the light at the end of the tunnel and then something like this happened. I feel very downhearted because we weren’t notified”.

The concerns are shared by the Chamber of Commerce with CEO Catherine Papani saying that they did reach out to the Financial Secretary Doreen Siataga who confirmed that the application of the withholding tax is well within the law but had not been imposed until now. 

Catherine Papani said that the Chamber had requested formal notification from the Ministry of Finance of this withholding tax and to explain and reference the law, but they have not received a response as yet. 

The Niue government is the largest consumer on the island using purchase orders to secure goods and services but many businesses complain that the government often takes several weeks or months to make payments.

To add salt to the wounds, the increasing cost of supplies is also hitting small businesses especially those in the food and beverage sector like Hio Café.  

“It’s very bleak at the moment. We’ve doubled what we spend in the stores to be able to come up with a product to be able to sell to consumers that is affordable. We’re in dismal times and people keep asking me who is the price control board?”.

“For example, oil, cooking oil, it’s crazy. Just the other day, the price change three times in one week. First of all it was $15 for two litre oil and then it was $23 and then it was $29. It’s crazy”, said Victoria Posimani-Kalauni.

Another local business owner Willie Saniteli told BCN news that he is a NCT registered business but his invoices to the government are now being taxed this additional 10% withholding tax, so for Saniteli he is being double taxed. 

Saniteli said that, in response to this additional tax, he will have no choice but to increase the amount in his invoices to reflect these increases.

The Chamber of Commerce is very concerned with the manner in which the tax was applied without warning. Catherine Papani said that communication is key for businesses on such matters and when the government talks of strengthening the Public Private Partnership then this is not the way to go about that, if government agencies are not willing to share information. 

BCN News reached out to the Tax Office and to the Financial Secretary for comments on the concerns of the businesses, but we have yet to receive a response.