Tuvalu - Politics, government, and taxation

The first parliamentary elections in the independent nation of Tuvalu were held in 1981, and the nation is now governed by a revised constitution which was adopted in 1986. Under the terms of the new constitution, the British monarch is the nation's head of state and is represented by a governor-general chosen from among the Tuvaluans by the prime minister. Tuvalu does not have formal political parties, but the 12 members of the unicameral (single-chamber) parliament often align themselves in factions. In 1999, Ionatana Ionatana was elected prime minister on a platform devoted to governmental reform to liberalize the economy and to bolster Tuvalu's international standing.

From independence onward, the government has been a major actor in the national economy. For instance, the only hotel in the nation is government-owned as is the islands' only radio station. In addition, the government owns about one-fourth of the land on the islands (most of these lands are leased to clans to be farmed on a communal basis), and almost one-quarter of the nation's population works for the government. Until his death in December 2000, Ionatana sought to divest the government from these publicly-held ventures and encourage private enterprise. The main policy used to encourage new business and to attract foreign companies is the designation of "pioneer status" for certain new businesses (including tourism) which gives them tax-exempt status.

The government has also endeavored to lessen its reliance on foreign aid. The arrangement to lease its Internet domain name, ".tv," to the Canadian company dotTV is a major part of this effort. In order to assure input into the marketing of the domain name, the government is a significant minority shareholder in dotTV and has a seat on the company's board. The government merged the operations of the nation's 2 main banks in order to improve efficiency and reduce redundancy. In addition, the government has sought to improve the economies of the outer islands through a US$4 million program underwritten by the Asian Development Bank and through the construction of airfields on all of the nation's islands. A central goal of this effort is to direct power away from the central government and into the hands of localities. As the national government lessens its reliance on foreign aid to conduct day-to-day operations, it plans to shift the bulk of the funds it receives into programs to improve the health and living conditions on the outer islands where some two-thirds of the population live below the national poverty line with incomes of less than US$1,000 per year.

There is a fixed income tax of 30 percent on all income above US$1,900, and all corporate profits are also taxed at the flat rate of 30 percent. There are also sales taxes on certain goods and services. The government also taxes stamp sales, copra, and fishing licenses. The government maintains price limits on fuel and basic food items.

Under Ionatana, Tuvalu became the 189th member of the United Nations and a full member of the Commonwealth of Nations. The government also supports the establishment of a free-trade zone in the region. One of the major political issues is the status of the islands, as an increasing number of Tuvaluans support the removal of Queen Elizabeth II as their head of state and the establishment of a full republic. Tuvalu has likewise been a vocal supporter of international efforts to stop global warming, believed to be a factor in the rising ocean levels that are reducing the nation's land.

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