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 fallen short of expectations.
Kumar asserted that the raised VAT has not met the revenue target, only slightly exceeding the revenue levels achieved with the previous 9 percent rate.
“This hike has reduced consumer spending and eroded purchasing power, worsening the economic plight of Fijians,” she said.
Kumar also argued for the necessity to reduce the current 15 percent VAT rate.
“Despite an increase in disposable income from remittances, the anticipated VAT revenue has not materialized.”
“When the VAT stood at 9%, revenue collections amounted to 1 billion dollars. Raising it to 15% resulted in only $300 million additional revenue, falling $200 million short of the $1.5 billion target.”
“This shows the VAT hike has not resulted in a revenue windfall. A lower VAT would have stimulated the economy by increasing disposable income and boosting consumption.”
“Instead, the government has opted for a measure that burdens households struggling with high living costs and inflation.”
“Inflation reached 6.7 percent in June, up from 5.8% in May. It is anticipated that inflation will be around 4.4 percent at the end of 2024, much higher than in 2023.”
Kumar claimed that the Finance Minister often exaggerates figures.
“How will the government lose 600 million in revenue when it cannot achieve the target?”
“The Finance Minister did not address in the press statement the failure to collect $1.5 billion despite raising VAT to 15 percent.”
“The public can recall that the justification given for the VAT increase by the Coalition Government was to pay off debt. However, not a single cent was paid towards debt reduction. Instead, government debt increased by a billion dollars.”
“Hon. Prasad’s approach fails to provide meaningful solutions to the high cost of living and the sluggish economy. The minimal wage increases proposed will not offset the impact of inflation, especially for private sector workers.”
“The Government’s insufficient 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 that the shift to immediate VAT payment at borders has hurt 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.”
“The Government’s economic management remains directionless, burdening citizens with higher taxes and insufficient support.”