Exploring Fiji’s VAT Dilemma: Finance Minister Reveals $600 Million Revenue Loss

Minister for Finance Biman Prasad stated yesterday that reducing Fiji’s Value Added Tax (VAT) from 15 percent to nine percent would result in a significant revenue loss of $600 million. During his address in Parliament, Mr. Prasad emphasized that lowering VAT is not currently feasible.

“If we reduce VAT from 15 to nine percent, we will lose $600 million in revenue,” Mr. Prasad explained. “For every one percent reduction in VAT, we lose about $100 million in tax revenue. The question is, how are we going to compensate for this? Are we going to increase the fiscal deficit and take out a $600 million loan, or reduce expenditure by $600 million? It’s easy to suggest reducing VAT without providing a solution for the revenue gap.”

Mr. Prasad pointed out that members of Parliament from the Opposition had previously supported a 15 percent VAT with no exemptions when they were in government.

“When we increased VAT from nine percent to 15 percent in the last budget, we conducted thorough analyses, explored various options, consulted with experts, and discussed it with our multilateral partners,” Mr. Prasad said. “We knew it was a difficult decision, so we had to get it right. Despite exempting 22 items from VAT, prices have increased due to higher production costs and other associated expenses like freight, insurance, and storage, which are beyond our control.”

The Minister emphasized that the government is continually exploring options to provide relief to the people. “The Minister for Trade and the FCCC are constantly looking at various tools and policies to offer relief. Decisions in this regard will be forthcoming soon.”

Mr. Prasad also noted that Fiji’s major trade partners are experiencing high inflation rates. He explained that due to these trade relationships, it is natural for import prices from other countries to be high, significantly impacting Fiji.

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