Chaudhry Calls for VAT Cut to Ease Fiji’s Cost of Living Crisis

Former Prime Minister Mahendra Chaudhry has urged the government to reconsider its approach to managing the rising cost of living in Fiji. He suggested that a reduction of the Value Added Tax (VAT) from its current rate of 15 percent back to the previous level of 9 percent could significantly ease the financial burden faced by Fijians.

Chaudhry’s comments came in response to Finance Minister Prof Biman Prasad’s statement indicating that there are no immediate solutions for controlling inflation. The former Prime Minister criticized the Minister’s decision to increase VAT, arguing that it has backfired and exacerbated the challenges faced by the population rather than alleviating them as promised during the campaign.

He explained that raising VAT was a simplistic measure to address a financial crisis and meet public debt obligations, yet it has resulted in higher inflation, diminished consumer purchasing power, and has hampered economic growth, particularly for small businesses. Recent reports indicate that inflation has reached 7.1 percent, the highest in over a decade, driven largely by the VAT hike, with government revenue from VAT falling short of expectations.

Chaudhry pointed out that despite claims of a declining debt-to-GDP ratio, this is misleading as the reduction has been influenced by rising inflation rather than genuine economic improvement.

He proposed several alternatives for the government to consider, including the reintroduction of the Service Turnover Tax and Stamp Duty, increasing import duties on non-essential luxury items, and implementing a progressive income tax model. Additionally, he suggested that the government should contemplate removing corporate tax exemptions, which could potentially generate an extra $120 million in revenue.

The insights provided by Chaudhry highlight the pressing need for the government to explore more effective fiscal strategies that prioritize the welfare of its citizens while addressing the economic challenges facing the nation.

This article emphasizes that with thoughtful policy adjustments, there is still room for improvement in Fiji’s economic management. A potential reduction in VAT could cultivate a more favorable environment for citizens and businesses, fostering growth and resilience in the face of ongoing financial pressures.