Former Prime Minister Mahendra Chaudhry has voiced his opinion that the current Government could alleviate the escalating cost of living in Fiji by reducing the Value Added Tax (VAT) from its current rate of 15 percent back to the previous 9 percent. His remarks come in light of Finance Minister Prof Biman Prasad’s acknowledgment that there is no immediate solution to controlling this rising cost.
Chaudhry criticized the Finance Minister for increasing VAT as a quick fix to address financial challenges and public debt, suggesting that this decision has not only failed to deliver the promised results but has actually exacerbated the difficulties faced by Fijians. He emphasized that this increase in VAT has led to inflation, eroded consumer purchasing power, and negatively impacted small businesses, all of which contribute to a struggling economy.
According to Chaudhry, the Reserve Bank reported inflation rates at a high of 7.1 percent in April 2024, a level not seen in a decade, largely attributed to the VAT hike. He pointed out that the actual revenue collected from VAT was significantly lower than expected, indicating that the supposed benefits of this policy have not materialized. Additionally, he emphasized that the apparent improvement in the debt-to-GDP ratio was misleading, as it was largely due to inflation rather than genuine economic growth.
Chaudhry suggested that instead of imposing a higher VAT, the Government could explore various alternatives for revenue generation. These could include reinstating the Service Turnover Tax and Stamp Duty, enforcing higher duties on non-essential luxury imports, or implementing a progressive income tax system that would place a larger tax burden on wealthier individuals. He also recommended re-evaluating corporate tax exemptions, which could potentially add $120 million to government revenues.
Overall, Chaudhry’s comments reflect the ongoing discussions about economic strategies in Fiji, showcasing a call for more effective solutions to support the populace during challenging economic times. This outlook shines a light on the importance of responsible fiscal policies that prioritize the welfare of citizens, potentially guiding the Government toward a more thoughtful approach in managing the nation’s economy. Such adjustments could revive hope for a more stable and affordable living environment for Fijians.
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