Former Prime Minister Mahendra Chaudhry has called for the current government to lower the Value Added Tax (VAT) from 15 percent back to 9 percent, arguing that this move is essential to ease the burdens Fijians are facing due to rising living costs. This statement follows Finance Minister Prof Biman Prasad’s admission that there are no immediate solutions to manage the increasing cost of living.
Chaudhry criticized the government’s decision to elevate VAT to 15 percent during Prasad’s first budget, describing it as a hasty response to a financial crisis that ultimately exacerbated the hardship for citizens rather than alleviating it. He pointed out that increasing VAT has led to inflation, decreased consumer purchasing power, and harm to small businesses.
In April 2024, the Reserve Bank reported an alarming inflation rate of 7.1 percent—the highest in a decade—primarily attributed to the VAT increase. Chaudhry noted that the VAT revenue collection fell short of projections, yielding less than $300 million instead of the anticipated $450 million. He argues that the government has seen little net gain from this tax increase, particularly given its adverse effects on the economy and lower-income households.
Chaudhry raised concerns about the persisting public debt crisis, stating that despite claims of a declining debt-to-GDP ratio—from 90 percent to 80 percent—the reality is distorted by inflationary effects rather than genuine economic growth.
Looking forward, Chaudhry proposed alternative tax measures that the government could consider, such as reintroducing the Service Turnover Tax and Stamp Duty, or implementing higher import duties on non-essential luxury items. He also suggested reforming corporate tax exemptions to potentially raise an additional $120 million for government revenue.
This discourse underscores the intricate balance governments must maintain between fiscal policy and the economic well-being of citizens. While the current predicament may appear daunting, it also presents an opportunity for policymakers to devise innovative solutions that could lead to a more equitable tax system and improved economic resilience.
In summary, the call for a reduction in VAT highlights significant concerns about the current economic strategy and offers pathways for potential change that could benefit the citizens of Fiji. It emphasizes that with the right measures, it is possible to combat economic challenges while fostering a more supportive environment for all Fijians.
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