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 it has not achieved its revenue targets.
Kumar pointed out that the VAT hike has fallen short of expectations, barely exceeding the revenue levels achieved when the VAT was set at 9 percent. She emphasized that this increase has reduced consumer spending, eroded purchasing power, and worsened the economic situation for Fijians.
Kumar argues for a reduction in the current 15 percent VAT rate, highlighting that the expected revenue from the hike has not materialized despite increased disposable income from remittances. She noted that when the VAT was 9 percent, it generated 1 billion dollars in revenue. Raising it to 15 percent only added 300 million dollars, falling 200 million dollars short of the 1.5 billion dollar target.
According to Kumar, the VAT increase has not resulted in a significant revenue boost. She suggested that a lower VAT rate would stimulate the economy by enhancing disposable income and boosting consumption. Instead, the government has imposed a measure that burdens households already struggling with high living costs and inflation.
Kumar cited that inflation rose to 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, higher than in 2023.
She also accused the Finance Minister of exaggerating figures, questioning how the government could lose 600 million in revenue when it cannot achieve its target. Kumar stated that Hon. Prasad did not address the failure to collect the targeted 1.5 billion dollars despite the VAT increase.
Kumar recalled that the Coalition Government justified the VAT increase by claiming it was necessary to pay off debt. However, not a single cent has been used for debt reduction; instead, government debt has increased by a billion dollars. She criticized Hon. Prasad’s approach, stating it fails to provide meaningful solutions to the high cost of living and the sluggish economy. She argued that the proposed minimal wage increases would not offset the impact of inflation, particularly for private sector workers.
She further contended that 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 rendered the economy vulnerable.
Kumar added that the shift to immediate VAT payment at borders has adversely affected small and medium-sized businesses, worsening their cash flow and increasing product costs. She concluded that the Finance Minister’s VAT hike has penalized the majority of Fijians without spurring economic growth or providing relief from the high cost of living, leaving the government’s economic management directionless and burdensome for citizens.