Independent Member of Parliament Premila Kumar asserts that Finance Minister Professor Biman Prasad’s defense of the Value Added Tax (VAT) increase from 9 to 15 percent is inadequate.
Kumar states that the heightened VAT has not achieved its revenue goals, only marginally exceeding the earnings with the previous 9 percent rate.
“This increase has diminished consumer spending and reduced purchasing power, worsening the economic conditions for Fijians,” Kumar explained.
She contends that there is a strong case for reducing the current 15 percent VAT rate.
“Despite increased disposable income from remittances, the anticipated VAT revenue has not been realized,” she said. “When VAT was at 9 percent, revenue collections reached 1 billion dollars. Raising it to 15 percent brought only an additional 300 million dollars, falling 200 million short of the 1.5 billion target.”
“This indicates that 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 instead.”
“The Government has chosen a measure that burdens households already struggling with high living costs and inflation,” Kumar said. “Inflation reached 6.7 percent in June, up from 5.8 percent in May. It is anticipated that inflation will be around 4.4 percent at the end of 2024, which is much higher than in 2023.”
Kumar accuses the Finance Minister of exaggerating figures. “How will the Government lose 600 million in revenue when it cannot meet its target?” she asked.
“Hon Prasad did not address in his press statement the failure to collect 1.5 billion dollars despite raising VAT to 15 percent,” Kumar stated. “The public can remember that the justification given for the VAT increase by the Coalition Government was to pay off the debt. However, not a single cent has gone towards debt reduction. Instead, government debt increased by a billion dollars.”
“Hon. Prasad’s approach fails to provide meaningful solutions to the high cost of living and the sluggish economy. The minimal wage increases proposed will not offset the impact of inflation, especially for private sector workers.”
“The Government’s insufficient strategic support for the private sector, failure to stem the exodus of skilled professionals, and neglect of capital works have left the economy vulnerable,” she added.
Kumar also noted 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,” she concluded. “The Government’s economic management remains directionless, burdening citizens with higher taxes and insufficient support.”