Economy of Tonga

Exports & Imports

Tonga's main exports are agricultural products like squash, coconuts, bananas, and vanilla beans, along with some fish. They import a wider variety of goods, including food, beverages, machinery, and fuel. Recent data from the Asian Development Bank (ADB) estimates that Tonga's exports reached $42 million USD in 2023, while imports were significantly higher at $187 million USD.

Infrastructure Development

The Tongan government is investing in infrastructure development, particularly focusing on improving the country's road network. The total road length in Tonga is estimated to be around 400 kilometers, with a mix of paved and unpaved roads. However, challenges remain in maintaining existing roads and expanding them to remote areas.

Fiscal Policy

The Tongan government prioritizes increasing public spending to support economic growth and social development. This can involve raising taxes or borrowing money. Recent data suggests a focus on improving tax collection to generate more government revenue.

Monetary Policy

Tonga, like many other Pacific Island nations, doesn't have its own central bank. Instead, monetary policy is determined by the Reserve Bank of Fiji (RBF). The RBF focuses on maintaining regional financial stability and controlling inflation. Their most recent interest rate decision can be found on the RBF website.

Trade Agreements

Tonga participates in several regional trade agreements, like the Pacific Island Countries Trade Agreement (PICTA) and the World Trade Organization (WTO). These agreements aim to ease trade barriers and promote economic integration among member countries.

Environmental Regulations

Tonga has established environmental regulations to address issues like pollution, waste management, and the protection of its coral reefs. However, enforcing these regulations can be challenging due to limited resources and the importance of traditional practices that might impact the environment.

Tax system

Corporate tax rate: The standard corporate tax rate in Tonga is 20% for most businesses
Sales tax (GST): Tonga levies a Goods and Services Tax (GST) of 15% on most goods and services supplied in the country.
Property tax: Tonga does have a property tax system. The rate varies depending on the property location, type, and value. It's typically levied annually based on the property's assessed rental value.
Payroll tax: Tonga has a Pay As You Earn (PAYE) system. Employers withhold a portion of employee salaries as income tax advance payment. The exact rate depends on the employee's income bracket. There are also separate social security contributions by both employers and employees.
Tax deductions and credits: Tonga offers various tax deductions and credits to incentivize specific activities or support social needs. These can include deductions for business expenses, charitable donations, and educational costs.
Tax compliance: Tax compliance in Tonga is considered to be a developing area. The Tonga Revenue & Customs department is working on improving tax administration and collection efficiency. However, challenges remain, particularly in the informal sector.
Tax burden: Compared to some Pacific Island neighbors, Tonga's overall tax burden is considered moderate. However, the government has made efforts to increase tax collection to generate more revenue for public services.