Independent Member of Parliament Premila Kumar has criticized Finance Minister Professor Biman Prasad’s justification for the hike in Value Added Tax (VAT) from 9 to 15 percent, stating it has not achieved its revenue targets.
Kumar highlighted that the increased VAT barely surpassed the revenue levels collected at the previous 9 percent rate.
“The hike has decreased consumer spending and reduced purchasing power, further worsening the economic situation for Fijians,” she said.
Kumar contends that there is a strong argument for lowering the current VAT rate from 15 percent.
“Despite expected increased revenue from remittances, VAT revenue has not met expectations. When VAT was 9%, revenue collections reached 1 billion dollars. Raising it to 15% only resulted in an additional $300 million, falling $200 million short of the $1.5 billion target.”
“This indicates that the VAT increase did not produce the anticipated revenue windfall. A lower VAT would have stimulated the economy by increasing disposable income and boosting consumption,” Kumar explained.
“Instead, the Government has chosen a measure that burdens households already struggling with high living costs and inflation.”
Kumar noted that inflation rose to 6.7 percent in June, up from 5.8% in May, and it is anticipated to be around 4.4 percent by the end of 2024, which is higher than in 2023.
She accused the Finance Minister of exaggerating figures.
“How can the Government claim it will lose 600 million in revenue when it has not even managed to achieve the target?” Kumar asked.
“Hon. Prasad did not address the failure to collect $1.5 billion despite raising VAT to 15 percent in his press statement. The Coalition Government previously justified the VAT increase as necessary to pay off debt, but not a single cent has been directed toward debt reduction. Instead, government debt has increased by a billion dollars.”
Kumar argued that the Finance Minister’s approach falls short of providing meaningful solutions to the high cost of living and sluggish economy. She suggests that minimal wage increases will not offset the impact of inflation, especially for private sector workers.
“The Government’s lack of strategic support for the private sector, failure to curb the exodus of skilled professionals, and neglect of capital works have left the economy vulnerable,” she added.
Kumar also pointed out that the shift to immediate VAT payment at borders has negatively impacted 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 said.
“The Government’s economic management remains directionless, burdening citizens with higher taxes and insufficient support.”