Former Prime Minister Mahendra Chaudhry has proposed that the Fijian Government could effectively address the escalating cost of living by reducing the Value Added Tax (VAT) from the current 15 percent back to its previous 9 percent. Chaudhry’s comments come in response to Finance Minister Prof. Biman Prasad’s admission that the Government lacks immediate solutions to control rising living costs.
Chaudhry criticized the Minister for his VAT increase, stating that it has not only proven ineffective but has exacerbated financial burdens on citizens. He argued that the decision to raise VAT during Prasad’s first budget was a misguided attempt to resolve a financial crisis and manage high public debt, rather than a thoughtful strategy to aid citizens struggling with everyday expenses.
Highlighting the negative effects of the VAT increase, Chaudhry noted that it has contributed to inflation, which reached a ten-year high of 7.1 percent in April 2024, and has diminished consumer purchasing power and slowed economic growth. He pointed out that the revenue collected from VAT has fallen short of expectations, amounting to less than $300 million compared to an anticipated $450 million, suggesting the overall impact of the tax increase has been minimal or even detrimental to government finances.
Chaudhry further criticized the Finance Minister’s claims regarding the improvement of the debt-to-GDP ratio, asserting that it has declined not due to a strengthening economy but rather because of inflation affecting GDP figures. He added that the burden of VAT has disproportionately affected those least able to cope with increased taxes.
Chaudhry encouraged the Government to explore alternative revenue-raising methods, such as reinstating the Service Turnover Tax and Stamp Duty, imposing higher import duties on luxury items, or adopting a more progressive income tax. Additionally, he suggested eliminating corporate tax exemptions could provide a significant boost to government revenue.
In light of these discussions, it is essential for the Fijian Government to consider various avenues to alleviate the economic pressures on its citizens. A return to a lower VAT rate could provide immediate relief and demonstrate a commitment to improving the living standards of Fijians. By exploring alternatives and being transparent about the impacts of fiscal policies, the Government may foster greater trust and collaboration with the public.
Overall, this article highlights the vital conversation surrounding taxation and economic management in Fiji. There is hope that with thoughtful adjustments, the Government can create a more favorable economic environment for all citizens.
Leave a comment