Former Prime Minister Mahendra Chaudhry has urged the current Government to consider reducing the Value Added Tax (VAT) from 15% back to its former rate of 9%. He believes that such a move could effectively alleviate the rising cost of living that many Fijians are currently facing. Chaudhry’s comments came in response to Finance Minister Prof. Biman Prasad’s recent admission that the Government lacks immediate solutions to the economic challenges affecting citizens.

Chaudhry criticized Prasad’s decision to raise VAT as part of the first Budget, suggesting it was a misguided attempt to resolve a financial crisis while exacerbating the struggles of the populace. He claimed that this tax increase has not only failed to deliver the anticipated relief but has also worsened economic conditions for many, contradicting promises made during the election campaign.

He highlighted the negative consequences of the VAT hike, including increased inflation, diminished purchasing power for consumers, and adverse effects on small businesses. Recent data from the Reserve Bank indicated that inflation had surged to a record 7.1% in April 2024, a rate not seen in a decade, with the rise attributed largely to the VAT increase. Revenue generated from VAT has fallen significantly short of expectations, indicating the policy’s limited effectiveness in providing the needed financial support to the Government.

Chaudhry pointed out that Fiji’s debt level continues to grow, undermining claims that the debt-to-GDP ratio has improved. He clarified that the decline in this ratio is misleading, as it primarily reflects inflation-driven increases in GDP rather than genuine economic growth. He suggested that the burden of taxation is disproportionately falling on the lower-income citizens, who can least afford it.

To address these issues, Chaudhry proposed several alternative taxation strategies, such as reinstating the Service Turnover Tax and Stamp Duty, imposing higher duties on luxury imports, and considering a more progressive income tax structure. He also recommended reevaluating corporate tax exemptions, which could bolster government revenue significantly.

This debate highlights the ongoing discussions regarding fiscal policy and taxation in Fiji, reflecting the complexities of managing an economy while addressing social equity. As citizens continue to grapple with rising living costs, it is crucial for the Government to adopt approaches that genuinely support those in need, fostering a more resilient and fair economic environment.

In summary, Chaudhry’s perspective emphasizes the importance of thoughtful and inclusive financial policies that prioritize the welfare of ordinary Fijians, addressing both current economic pressures and long-term fiscal health. A potential shift in VAT policy could not only provide immediate relief but also reflect the Government’s commitment to the well-being of its citizens.