WORLD TRADE
ORGANIZATIONG/SCM/Q3/FJI/5
25 June 2002
(02-3530)
Committee on Subsidies
and Countervailing Measures
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by FIJI to Questions Posed by AUSTRALIA,1 CANADA,2
the EUROPEAN COMMUNITIES3 and the UNITED STATES4
The following communication, dated 21 June 2002, has been received from the Permanent
Mission of Fiji.
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Replies to Questions by Australia
1. Which industry sectors have benefited from the profit tax exemption under the Short-
Term Export Profit Deduction scheme?  When was this company introduced?  How does an
enterprise qualify?  What is the definition of an exporter under this scheme?
Reply
The tax deduction is granted to all exporters in respect of profits derived from export income.
The deduction to be allowed is 100 per cent of the export income in the first two years commencing
2001 but is gradually reduced to nil over a period of 8 years.
The scheme was introduced in 2001 as part of the Investment Package, which was designed to
make the tax system more equitable and efficient.
A very important feature of the scheme is that any exporter will have access to this provision,
irrespective of the value of the export income derived or the proportion of business that is concernedwith export production.
For the purpose of the provision, an exporter is deemed to be one who takes or causes the
goods or services to be taken out of Fiji.
                                                     
1 G/SCM/Q3/FJI/1.
2 G/SCM/Q3/FJI/3.
3 G/SCM/Q3/FJI/2.
4 G/SCM/Q3/FJI/4.G/SCM/Q3/FJI/5
Page 2
2. Is there a condition that domestic goods must be used to qualify under the Export Credit
Ratio Facility?
Reply
As part of policy measures implemented in response to the severe downturn in the Fiji
economy following the political crisis of May 2000, the Reserve Bank introduced an Export Credit
Ratio (ECR) on 1 August 2001.  The ECR policy, which was aimed at improving exporters’ access to
credit, required each commercial bank to maintain a minimum of 5 per cent of their average deposits
and similar liabilities in outstanding loans to eligible exporters of goods and services.
Under this facility, all primary exporters (except producers of traditional exports in the
ineligible list 5) and secondary exporters qualify, provided they satisfy the value added rules.  Exports
to all destinations (except under the SPARTECA and Lome agreements) must have at least
40 per cent local (Fiji) value added component.  Funding for the construction and refurbishment of
up-market hotels and exports of certain professional services like architectural, engineering and
maritime services are also eligible.
Replies to Questions by Canada
1. Under the export processing factories/export processing zone schemes please provide
statistical data on the value of exports benefiting from this programmes as well as the number
of companies benefiting from these programmes?
Reply
There were about 290 companies operating under the scheme.  Unfortunately, due to the
unforeseen problems with the Customs ASYCUDA system, it is difficult at this stage to extract the
export data. However, we can provide you with such data if additional time is given.
For ease of reference, please find attached a copy of the Fiji Islands Revenue & Customs
Authority’s (FIRCA) Industry Incentives Pamphlet outlining detailed information of concessions and
incentives available.
Replies to Questions by the European Communities
Short-Term Export Profit Deduction
1. Please explain when the programmes came into operation.
Reply
The Export Profit Deduction came into effect in 2001 as part of the Investment Package.
Export Processing Factories were formally introduced in 1991 as part of the Tax Incentives
Reform programme for export promotion.
                                                     
5 Sugar, molasses, gold and green logs and rough unprocessed sawn timber.G/SCM/Q3/FJI/5
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The Audio-Visual Incentives Amendment Decree 2000 was promulgated in May 2001 as a
step towards producing films with substantial Fi ji content. The tax incentives are geared towards
encouraging investment and relocation to the proposed Studio City.
2. Please indicate whether the programmes provide for other forms of subsidies than
exemption of import duties and external taxes (e.g. grants, provision of goods and services.
Reply
No other forms of subsidies are provided apart from tariff and tax incentives.
3. Do the programmes provide for a condition to use domestic goods? If yes, please
describe the relevant provision.
Reply
There is no condition as such, but the programmes are geared towards encouraging the usage
of local content, value added and employment.
4. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Reply
To encourage investment, the duty on construction materials and capital goods has been
reduced to 0 per cent in 2001 before moving to the 3 per cent band in 2003.  The duty on production
inputs will be subject to a rate of 3 per cent and this applies to all goods presently under the10 per cent band and most that are duty free.  This, however, excludes essential goods for education,
health and agriculture, which will continue to enter duty free.
5. Please describe changes to the programme since 1 September 2001, if any.  In particular,
indicate any changes to the rate of exemption or the coverage of the programmes e.g. in terms of
the product, location etc.
Reply
There have been no significant changes to the programmes since September 2001.
6. Please indicate for each programme how many companies have benefited from the
respective programme as of 1 September 2001.
Reply
Audio-visual Concessions – No Company has taken advantage of this scheme since the promulgation
of the Decree in 2001.
Export Processing Factories – The Scheme has been terminated culminating in the repeal of the
Decree with effect from 1 January 2001. As a conseq uence, no further approvals were granted since
December 2000.  However, approximately 290 companies have taken advantage of the scheme sinceits inception 12 years ago.G/SCM/Q3/FJI/5
Page 4
7. Please elaborate on when and how Fiji intends to phase out the programmes.
Reply
Export Income Deduction – The deduction to be allowed is 100 per cent of the export income in the
first 2 years commencing 2001 but is gradually reduced to nil over a period of 8 years in the hope of
complying with the World Trade Organization obligati ons in relation to export subsidies.  Having a
finite schedule will ensure that all exporters are br ought into the standard tax regime within a finite
timeframe.
Export Processing Factories – The Decree has alread y been repealed with effect from 1 January 2001.
Audio-Visual:
(i) Net income from an F1 production is exempt until the taxpayer has received a 60 per cent
return on capital expended.  Thereafter, net income will be fully taxed at the marginal rate.
(ii) Net income from an F2 production is exempt until the taxpayer has received a 50 per cent
return on capital expended.  Thereafter, net income will be fully taxed.
(iii) Net income from a non-qualifying audio-visual production will be fully taxable at the
marginal rate.
The Income Tax Act (Film Making and Audio-Visual Incentives Amendment Decree 2000)
1. Please indicate when the pr ogrammes came into operation?
Reply
The Film Making and Audio-Visual Incentives Amendment Decree 2000 was promulgated on
18 May 2001 together with the Fiji Audio-Visual Commission Decree.
2. Please indicate whether the programmes provide for other forms of subsidies than
exemption of import duties and internal taxes (e.g. grants, provision of goods or services).
Reply
It only allows for full or partial exemptions from internal taxes.
3. Do the programmes provide for a condition to use domestic goods?  If yes, please
describe the relevant provision.
Reply
The use of domestic goods is encouraged through tax concessions aimed primarily for
investors in actual audio-visual productions. The F1 concessions encourage local expertise and Fijicontent. Concessions are also available to encourage other productions.G/SCM/Q3/FJI/5
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4. Please describe changes to the programme since 1 September 2001, if any. In particular,
indicate any changes to the rate of exemption or the coverage of the programmes e.g. in terms of
products, location etc.
Reply
No changes.
5. Please indicate from each programme how many companies have benefited from the
respective programme as of 1 September 2001.
Reply
No company has benefited as yet as the Decree was just promulgated in 2001.  The FAVC
has, however, received interest from investors to establish audio-visual projects in Fiji.
6. Please elaborate on when and how Fiji intends to phase out the programmes.
Reply
The Fiji Audio-Visual Commission Decree was promulgated on 18 May 2001.  This decree
has enabled the formation of the Fiji Audio-Visual Commission (FAVC), which is tasked to facilitatethe establishment and development of the audio-visual industry in Fiji.  The FAVC is still in its first
year of existence and as such there are no moves to phase out this programme in the immediate future.
Fiji must be eligible or allowed to continue with this programme given the infancy of the film making
and audio-visual industry in Fiji. Subsidies and other forms of assistance, we believe, are allowable
for industries, which are just getting their feet off the ground.  With regards to the Studio City Zone,residents of the Zone will enjoy tax-free status (no time-limit) on individual income derived as
earnings from audio-visual productions. However, ther e is yet to be a single film or music production
as of May 2002.
Replies to Questions by the United States
Short-Term Export Profit Deductions
2. Could Fiji please explain whether these programmes provide any other incentives apart
from the full or partial exemption from import duties and internal taxes.
Reply
Short-Term Export Profit Deduction – No other incentives are provided, apart from the net taxable
income earned in export would be allowed as a deduction from taxable income.
Export Processing Factories – The Decree has already been repealed on 1 January 2001.
Audio-Visual Concessions – No other concessions are provided apart from income tax in the form of
F1 and F2 tax concessions.  These concessions are primarily for investors in actual audio-visual
productions.  F1 are concessions to encourage local expertise and Fiji content, while F2 concessionsare to encourage other productions to spend their production dollars in Fiji.G/SCM/Q3/FJI/5
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3. Please provide the customs duty and int ernal tax rates companies would pay absent
these programmes.
Reply
Audio-Visual – There is no customs duty concession therefore companies investing in audio-visual
production will be subjected to the normal tariff rate.  With regard to corporate tax, companies would
be paying 32 per cent.
Short-Term Export Profit Deduction – Company’s would be subject to 32 per cent corporate tax.
4. Could Fiji please provide statistical data on the number of companies that benefit from
each of these programmes, the industry sectors represented by these companies, and the value
of exports for these companies?
Reply
Short-Term Export Profit Deduction – Since the in troduction of the scheme, only one company has
taken advantage of the concession.  It’s a new provision and certain amendments are still pending in
order to apply the law effectively.
Audio-Visual Concession – None so far.
Export Processing Factories – The scheme has been phased out and no new operating licenses were
granted since 2000.
The Income Tax Act (Film Making and Audio-Visual Incentives Amendment Decree 2000)
1. Please provide greater detail regarding th e nature of these programmes in accordance
with G/SCM/39 and G/SCM/6.
Reply
(i) Title
Film Making and Audio-Visual Incentives Amendment Decree 2000.
(ii) Period Covered by the Notification
Information not available.
(iii) Policy Objective
The Fiji Audio-Visual Commission is to develop and promote the audio-visual industry in
Fiji.  It aims to develop a culturally diverse and commercially viable industry to record and
preserve the culture and history of the people of Fiji; and to train locals in the audio-visual
industry as well as attract international businesses to Fiji.  The Film Making and Audio-Visual Incentives Amendment Decree 2000, which is administered by the FAVC, is one of
the measures in realising this.G/SCM/Q3/FJI/5
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(iv) Background and authority for the subsidy
The Income Tax Act was amended to incorporate incentives for the film making and audio-
visual industry which were non-existent prior to May 2001.  The tax incentives for the film
making and audio-visual industry are granted under the Income Tax (Film Making andAudio-Visual Incentives Amendment) Decree 2001.
(v) Form of the subsidy
Full and partial income tax exemptions.
(vi) To whom and how the subsidy is provided
Tax deductibility in the year of capital invest ment in a qualifying audio-visual production of
between 125 per cent and 150 per cent and the first either 50 per cent or 60 per cent of the
invested amount recouped is exempt from income tax. These tax deductions are available to
all taxpayers in Fiji, including foreign companies.  The production financing is available to
producers of audio-visual material operatin g in Fiji, including wholly foreign-owned
companies.  Lifetime tax-free operating status: for businesses involved in production and/ordistribution of audio-visual product, or wh ich provide services to the production or
distribution of audio-visual material.  Tax-free residential status for individuals earning
income (min. F$100,000 per annum) in the audio-visual industry, or services to it, and
sportsmen and women who have their principal residence in Studio City, make an investment
of not less that F$250,000 in either domestic real estate or business assets and reside in Fijinot less than 60 days per annum in aggregate.  (Currently 1 Fiji dollar is approximately equal
to Australian $0.80 or United States $0.40).
(vii) Subsidy per unit or, in cases where this is not possible, the total amount or the annual
amount budgeted for that subsidy. Where provision of per unit per subsidy is notpossible, a full explanation
The tax concessions offered are subject to approval being granted to audio-visual productions,
so the total amount of concessions given annually is really dependent on the number of
approvals granted in a year.
(viii) Duration of the subsidy and/or any other ti me-limits attached to it, including date of
inception/commencement
The tax incentives are granted on approval of audio-visual productions.  Income derived by
the taxpayer is exempt from tax until the taxpayer has received from the commercial
exploitation a return of 50 per cent for particular productions and 60 per cent in other cases of
the monies expended.  No time-limit, however, has been set for the tax-free status on
individual income for permanent residents of the Studio City Zone.
(ix) Statistical data permitting an assessment of the trade effects of the subsidy
This is not available because there is yet to be a single film or music production to date and as
such an assessment of the trade effects is not possible.G/SCM/Q3/FJI/5
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2. Could Fiji please explain whether these programmes provide any other incentives apart
from the full or partial exemption from import duties and internal taxes?
Reply
It only allows for full or partial exemptions from internal taxes.
3. Please provide the customs duty and intern al tax rates companies would normally pay
absent these programmes.
Reply
These tax incentives are specifically for busine sses that would be involved in audio-visual
productions.  The film making and audio-visual indus try is new to Fiji and, as such, normal internal
tax rates absent these programmes are not applicable.
4. Could Fiji please provide statistical data on the number of companies that benefit from
each of these programmes, the  industry sectors represented by these companies, and the value
of exports for these companies?
Reply
As stated earlier, there is yet to be a single film or music production that has taken place and
as such no companies have benefited from these tax incentives.
5. Could Fiji please explain how the Export Finance Facility and Export Credit Ratio
programmes meet the definition of eligible programmes detailed in G/SCM/39?
Reply
Under G/SCM/39, eligible programmes for extension pursuant to these procedures, and for
which Members shall therefore grant extensions for the calendar year 2003 as referred to in 1(c), are
export subsidy programmes:
(i) in the form of full or partial exemptions from import duties and internal taxes;(ii) which were in existence not later than 1 September 2001;
(iii) which are provided by developing country Members;
(iv) whose share of world merchandise export  trade was not greater than 0.10 per cent;
(v) whose total Gross National Income for the year 2000 as published by the World Bank was at
or below US $20 billion;
(vi) and who are otherwise eligible to request an extension pursuant to Article 27.4, and(vii) in respect to which those procedures are followed.
Under the Export Finance Facility (EFF) and Ex port Credit Ratio (ECR), exporters under the
SPARTECA and Lome Trade Agreements automatically qualify in light of the requirements, which
they have already met under the respective trade arrangements, for which they receive variousG/SCM/Q3/FJI/5
Page 9
concessions.  In addition, under the EFF, eligible exporters can obtain credit at a concessional rate as
long as they meet the 40 per cent local value added requirement.  Under the ECR, exporters are given
access to credit, if they meet the same requirements set out under export finance facility.
In this light, the EFF and ECR meet the definition for eligible programmes.
6. In light of the local content requirements of the Export Finance Facility and Export
Credit Ratio, please comment on whether thes e programmes constitute prohibited subsidies
under Article 3.1 (b) of the Agreement on Subsidies and Countervailing Measures.
Under Article 3.1 (b) of the Agreement of Subsidies and Countervailing Measures, it states
that:
“Except as provided in the Agreement of Agriculture, the following subsidies, within
the meaning of Article 1, shall be prohibited: subsidies contingent, whether solely or
as one of several other conditions, upon the use of domestic over imported goods.”
Under the Export Finance Facility and Export Credit Ratio, in order to qualify for this
programme, an eligible exporter must have at least 40 per cent local value added content.  Therefore,
under the Agreement on Article 3.1(b), the use of domestic over imported goods makes this kind of
programme prohibited.
7. Because some eligible enterprises are entitled to benefits under this programme until
2014, please explain how Fiji would modify this programme so that subsidies do not extend
beyond any extension period provided.
Income derived by the taxpayer is exempt from tax until the taxpayer has received from the
commercial exploitation a return of 50 per cent for particular productions and 60 per cent in othercases of the monies expended. No time-limit, however, has been set on the tax-free status on
individual income for “permanent residents” of the Studio City Zone derived as earnings from audio-
visual productions.
8. Could Fiji please explain how the incentives under the Income Tax Act meet the
definition of eligible programmes detailed in G/SCM/39?
The Film Making and Audio-Visual Incentives Amendment Decree 2000 is an eligible
programme because:
(i) it allows for full or partial exemption from taxes. This is available to both residents and non-
residents who invest in or are employed or engaged in audio-visual productions produced ormade in Fiji. They are designed to stimulate development of the Fijian audio-visual industry;
(ii) these incentives were in existence not later than 1 September 2001;(iii) they are provided by a developing country Member, namely Fiji;(iv) Fiji’s share of world merchandise export trade was not greater than 0.10 per cent;(v) Fiji’s total Gross National Income (GNI) for the year 2000 as published by the World Bank
was at or below US$20 billion;G/SCM/Q3/FJI/5
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(vi) Fiji is otherwise eligible to request an extension pursuant to Article 27.4; and
(vii) the Eligible Programme Procedure has been followed by Fiji.
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