Tax Reform in Tonga and Its Impact on Vulnerable Communities

This chapter focusses on the impact of tax reform on vulnerable communities in the Kingdom of Tonga. As a former British protectorate, Tonga is heavily influenced by its colonial connections. Economic turmoil and mismanagement during the late 1990s forced the Tongan government to seek technical and financial assistance from the Asian Development Bank, which led to a comprehensive Economic and Public Sector Reform (EPSR) programme. The EPSR is a Western model recommended by donor agencies as the solution to Tonga’s economic woes. The EPSR comprised public sector reform, private sector growth, and revenue generation. Tax reform was the main tool for revenue generation, which set out to strengthen tax compliance and administration as well as implement Consumption Tax (CT) as a value-added tax. The EPSR is based on Western values and ideology, but failed to recognise that Tongan cultural values are important to the local community. A very different model and outcome of reform might have been possible had this been the case.