Fiji’s Independent MP Premila Kumar is calling for a reduction in the 15% VAT rate.
In a statement, Kumar argues that the VAT increase from 9% to 15%, introduced by the Coalition Fiji Government in the current financial year, failed to generate the expected revenue and has had adverse economic impacts.
“When VAT stood at 9%, revenue collections amounted to $1 billion,” Kumar said. “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.”
She contends that a lower VAT rate will boost the economy by increasing disposable income and consumer spending, dismissing the impact of the proposed minimum wage increase ($5 per hour from August 1, 2024), stating that it “will not offset the inflation impact, especially for private sector workers.”
“Inflation reached 6.7% in June, up from 5.8% in May. It is anticipated that inflation will be around 4.4% at the end of 2024, much higher than in 2023.”
In the original budget for FY2023-2024, the Coalition Government announced an increase in VAT to 15%. They had expected to collect around $1.5 billion from this increase. However, in the 2024-2025 budget, they revised their projected collection for the current financial year to $1.3 billion. They attributed the shortfall to “a combination of factors such as existing compliance issues and a slowdown in consumer spending, largely due to a decline in population resulting from migration, Fijians opting for longer-term work permits, and student and tourist visas.”
The budget document did not specify how much the government collected from VAT in the first 10 months of FY2023-2024 (August 2023-May 2024). However, it stated that VAT collection remained strong compared to previous years, and it expects a 32.4% increase in collection compared to the 2022-2023 financial year.
