The Fiji Hotels and Tourism Association says tourism is once again being used as the easiest collection point, warning that the new 5 percent Tourism Services Tax announced in the 2026-2027 National Budget could become a technical, financial and commercial nightmare, while questioning how businesses will implement the tax from 1st September.
While speaking during the Dialogue Fiji National Budget Forum, FHTA CEO Fantasha Lockington stressed that while the industry fully agrees that Fiji Airways must be supported, tourism is once again being targeted to shoulder the burden.
Lockington says Fiji Airways is a national asset, not just a tourism asset, as the airline supports tourism, trade through imports and exports, education, medical travel, government travel, investment, global connectivity and branding.
She says the industry is struggling to understand how the tax will work in practice.
Lockington questioned whether it will apply only to international visitors and not locals, how businesses will differentiate between local and international guests through their online booking systems, whether hotels will have to ask customers for local ID when they buy coffee, meals or spa treatments, and how businesses will deal with contracted rates for holidays that were booked three to eighteen months ago.
She also questioned whether FRCS will require scanned passports or IDs to confirm exemptions and how hotels will separate taxable and non-taxable services when guests use multiple facilities.
She also questioned whether businesses can legally absorb the 5 percent tax.
INSERT: Lockington on tax 1st July
She also questioned whether this could become the Government's approach whenever one of its subsidiaries faces financial problems.
The FHTA CEO says tourism already contributes through VAT, corporate tax, employment, import duties, procurement, foreign exchange, community support, destination marketing, investment and branding.
She says national aviation resilience should be a national responsibility, not a targeted burden on the same industry already carrying fuel costs, labour shortages, compliance pressure and global price sensitivity.
She says tourism accepts the need for fiscal discipline, but the industry cannot keep being asked to carry more of the national burden while key reforms remain slow, partial, unfinished and incomplete.
She also warned that if the new tax fails to make a significant impact, it could increase costs for visitors, damage Fiji's reputation with wholesalers and travel agents, and ultimately hurt the wider economy.
Responding to those concerns, Permanent Secretary for Finance, Shiri Goundar says Government fully acknowledges tourism's critical role in Fiji's economy.
Goundar says the sector provides more than 25,000 jobs, supports almost 40 percent of the economy and brings close to $3 billion into the country each year.
However, he says the tourism industry also recognises that without Fiji Airways, Fiji would not have a tourism industry of its current size.
He says Fiji Airways had a fuel budget of about $500 million for 2025 before the recent fuel price increases.
However, with aviation fuel costs having doubled, the airline now faces an additional $500 million in fuel costs over the next 12 months.
He adds that the airline cannot absorb those costs without suffering major financial losses.
According to Goundar, if Government acted purely as the airline's shareholder, Fiji Airways would have two options, which is to either reduce flights by 15 percent or significantly increase airfares to recover the higher fuel costs.
INSERT: Goundar on options 1st July
Responding to calls for the wider economy to share the burden, Goundar says the new levy is effectively a return of the former Service Turnover Tax that applied to the sector for several years.
He says businesses can choose whether to pass the additional 5 percent on to customers or absorb it themselves.
He acknowledges that a turnover tax is not the best way to design a tax, but says the intention is to protect Fiji Airways and, in turn, protect tourism.
The Permanent Secretary says the Government is prepared to work with the tourism industry to resolve implementation issues, including how the tax will apply to customers who have already made bookings.
He says Government had already delayed the implementation date from 1st August to 1st September following discussions with the industry.
He says while there are operational details that still need to be worked through, Government believes the bigger issue is protecting the tourism industry during a period of unprecedented fuel costs.
However, representing the Nadi Chamber of Commerce, as well as being the Founder and Director of Masters Group of Companies, Dr Ahmed Shakeel Sharif questioned whether Fiji Airways had also taken sufficient steps to reduce its own costs.
Dr Sharif says the Tourism Services Tax has become a major topic of discussion in the West.
He says it would not be fair for one sector to shoulder the burden of supporting another without that organisation first helping itself.
In response, the Permanent Secretary highlighted that while the Tourism Services Tax has been introduced to support Fiji Airways, Government is also providing a $200 million guarantee for the airline's borrowings, funded by taxpayers, as well as relief through fees and charges paid by the national carrier.
He says Government has also been engaging directly with the Fiji Airways Board and management on additional cost-cutting measures as well as discussing Fiji Airways' investment in non-core assets.
