Independent Member of Parliament Premila Kumar has criticized Finance Minister Professor Biman Prasad’s defense of the Value Added Tax (VAT) increase from 9 to 15 percent, stating that it has failed to meet revenue targets. According to Kumar, the higher VAT rate has barely exceeded the revenue levels achieved with the former 9 percent rate.
Kumar asserted that the VAT hike has diminished consumer spending and reduced purchasing power, worsening the economic situation for Fijians. She advocates for a reduction in the current 15 percent VAT rate, noting that despite higher disposable income from remittances, the expected VAT revenue has not been realized.
“When VAT was at 9 percent, revenue collections reached 1 billion dollars. Increasing it to 15 percent resulted in only an additional $300 million, falling $200 million short of the $1.5 billion target,” Kumar explained. She argued that this demonstrates the VAT increase has not produced a significant revenue boost. A lower VAT could have stimulated the economy by increasing disposable income and consumption.
Instead, the government has chosen a measure that burdens households already struggling with high living costs and inflation. Kumar highlighted that inflation reached 6.7 percent in June, up from 5.8 percent in May, and is expected to be around 4.4 percent at the end of 2024, much higher than in 2023.
She accused the Finance Minister of exaggerating figures, questioning how the government could lose 600 million in revenue when it had failed to meet the target. Kumar also pointed out that Hon. Prasad did not address the failure to collect $1.5 billion despite raising VAT to 15 percent.
Kumar recalled that the Coalition Government justified the VAT increase to pay down debt, yet no debt reduction occurred. Instead, the government debt increased by a billion dollars. She criticized Hon. Prasad’s approach for lacking meaningful solutions to the high cost of living and the sluggish economy, stating that the proposed minimal wage increases would not offset the impact of inflation, especially for private sector workers.
Additionally, Kumar noted the government’s lack of strategic support for the private sector, failure to curb the exodus of skilled professionals, and neglect of capital works, which have left the economy vulnerable. She also mentioned that the shift to immediate VAT payment at borders has hurt small and medium-sized businesses by worsening their cash flow and increasing product costs.
In conclusion, Kumar stated that the Finance Minister’s VAT hike has penalized the majority of Fijians and failed to spur economic growth or provide relief from the high cost of living. She described the government’s economic management as directionless, burdening citizens with higher taxes and insufficient support.