Independent Member of Parliament, Premila Kumar, stated that Finance Minister Professor Biman Prasad’s justification for raising the Value Added Tax (VAT) from 9 to 15 percent has not been convincing.
Kumar highlighted that the increased VAT has failed to meet revenue targets, barely exceeding the levels achieved with the previous 9 percent VAT rate.
“This hike has reduced consumer spending and eroded purchasing power, worsening the economic plight of Fijians,” she said.
Kumar made a compelling case for reducing the current 15 percent VAT rate.
“Despite increased disposable income from remittances, the anticipated VAT revenue has not materialized,” she mentioned.
She pointed out that when VAT was at 9%, revenue collections amounted to 1 billion dollars. Raising it to 15% resulted in only an additional $300 million, falling $200 million short of the $1.5 billion target.
“This shows the VAT hike has not resulted in a revenue windfall. A lower VAT would have stimulated the economy by increasing disposable income and boosting consumption,” Kumar argued.
“Instead, the Government has opted for a measure that burdens households struggling with high living costs and inflation,” she added.
Kumar noted that inflation reached 6.7 percent in June, up from 5.8% in May, and it is anticipated to be around 4.4 percent at the end of 2024, much higher than in 2023.
She accused Finance Minister Prasad of exaggerating figures, questioning how the Government would lose 600 million in revenue when it has not been able to achieve its target.
“Hon Prasad did not address in the press statement the failure to collect $1.5 billion despite raising VAT to 15 percent,” she claimed.
Kumar reminded the public that the justification given for the VAT increase by the Coalition Government was to pay down debt. However, not a single cent was paid towards debt reduction, and government debt instead increased by a billion dollars.
“Hon. Prasad’s approach fails to provide meaningful solutions to the high cost of living and sluggish economy. The minimal wage increases proposed will not offset the impact of inflation, especially for private sector workers,” she continued.
She criticized the Government for insufficient strategic support for the private sector, failure to curb the exodus of skilled professionals, and neglect of capital works, leaving the economy vulnerable.
Additionally, she stated that the shift to immediate VAT payment at borders has hurt small and medium-sized businesses, worsening their cash flow and increasing product costs.
“The Finance Minister’s VAT hike has penalized the majority of Fijians, failing to spur economic growth or provide relief from the high cost of living,” Kumar concluded.
“The Government’s economic management remains directionless, burdening citizens with higher taxes and insufficient support,” she asserted.