Minister for Finance Biman Prasad stated that if the Fijian Government reduces Value Added Tax (VAT) from 15 percent to nine percent, the country would experience a significant $600 million revenue loss.
During his address in Parliament, Mr. Prasad emphasized that cutting VAT is not a feasible solution at present. “If we reduce VAT from 15 to nine percent, we will lose $600 million in revenue,” he remarked. He explained that a one percent reduction in VAT corresponds to a $100 million loss in tax revenue.
Mr. Prasad questioned how the government could compensate for this revenue shortfall, pondering whether to increase the fiscal deficit or cut expenditure by $600 million. “It is easy for them to suggest reducing VAT without proposing how to address the revenue gap,” he said.
He noted that Opposition Members of Parliament seem to have forgotten that during their tenure in government, VAT was set at 15 percent with no exemptions.
“When we increased VAT from nine percent to 15 percent in the last budget, we conducted thorough analysis, explored various options, consulted experts, and discussed it with our multilateral partners,” Mr. Prasad explained. He added that despite the absence of VAT on 22 items, prices have still risen due to factors beyond control, such as increased production costs, freight, insurance, and storage.
Mr. Prasad mentioned that the Government and the Minister for Trade, under the Fair Competition and Consumer Commission (FCCC), are continually exploring ways to use available tools and policies to provide relief to the people. Decisions on these matters are expected to be announced soon.
He further highlighted that Fiji’s major trade partners are currently experiencing high inflation rates, which, due to trade links, results in higher import prices that significantly impact Fiji.