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The New Caledonian government approved on Wednesday a draft bill for parliamentary consideration to maintain the current TGC rate until the end of the year. The new rate could put pressure on the budgets of New Caledonian families, which have already been weakened by the crisis.
The TGC should maintain its rates at 0%, 3%, 11% and 22% until December 31, 2024. This is in any case the wish of the New Caledonian government, which this Wednesday stopped the deliberations in Congress.
In March this year, the executive branch reviewed a bill to reform the General Excise Tax, reducing its tax rates from four to three. The goal is to simplify this TGC while improving its performance.
However, the new version of TGC, which was envisioned before the May 13 riots, could lead to a price increase, at a time when the crisis has already affected many Caledonians.
The government recalled that with the reform of the TGC, most major household consumption items (food, medicines, school canteens, etc.), currently taxed at 3%, will be subject to the normal rate of 11%.
“A mechanical increase of 8 percentage points in the prices of these products would pose a greater risk to low-income households, whose purchasing power is already greatly tested due to the economic and social environment facing New Caledonia.”, the government is expected to say in its decision statement.
So why does it have to go through Congress again? The answer is legal. Before now, the breakdown of the TGC was defined by government decree. But the Administrative Court ordered New Caledonia to review its copy and this division must be determined by Congress rather than by decree.
Therefore, instead of revoking the decree of January 17, 2017 (and risking a price increase), the executive proposed a review of maintaining the current tax rates while correcting this legal error. It is now up to Congress to decide on the draft soon.
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