VAT reduced from 15% to 9%

VAT will be reduced from 15 percent to 9 percent from January 1st 2016.

While delivering the 2016 National Budget, Finance Minister Aiyaz Sayed-Khaiyum says the VAT reduction from next year will result in the reduction of the overall cost of items.

However, VAT exemptions for the list of basic items has been removed which means VAT will also be imposed on tinned fish, powdered milk, cooking oil, flour, tea, kerosene, prescribed medicine and repeat medicines.

The zero VAT rating for the first $30 of the FEA bill will also be removed meaning that VAT will now apply on that amount.  

Sayed-Khaiyum says to provide targeted assistance, more medicines will be included in the Free Medicine Scheme. It has also been confirmed that there will be no VAT charged for items like hearing aids and wheelchairs.

The Consumer Council will receive $150,000 to set up a hotline for consumers to lodge complaints about businesses not passing down tax and duty reductions on goods and services.

A 300 percent VAT penalty will also be reintroduced to enforce VAT compliance.

The Finance Minister has also announced that the non-reduction in prices due to tax and duty reductions are punishable by a penalty of $50,000 and upon conviction to a fine up to $100,000 or 5 years imprisonment.

Looking at the changes in taxes and duties:

The Service Turnover Tax will increase from 5 percent to 10 percent. This tax applies to hotels and other service providers like rental car operators; inbound tour operators; events management operators; recreation, entertainment and cinema operators; bars and nightclubs; bistros, coffee shops and restaurants with annual gross turnover of $1.25 million above; all water sports, underwater activities, skydiving; river safaris; people providing accommodation in private residence or property that accommodate tourists, international students and overseas visitors.

There will also be a new 6 percent Environmental Levy imposed apart from Service Turnover Tax.

Finance Minister Aiyaz Sayed-Khaiyum says only 5 percent more will be paid by visitors as VAT has been reduced from 15 percent to 9 percent.

The Short Life Investment Package for hotels will end from 2017.

The 55 percent Investment Allowance will continue to exist in 2016 at a reduced rate from 55 percent to 25 percent.

Sayed-Khaiyum also reveals that only $8 million in income tax was paid by hotels in 2014 although it is estimated that the total income was in excess of $800 million.

There will be increased taxes on cigarettes and alcohol by 18.5 percent (12.5 percent Excise Duty and 6 percent Health Levy).

Duty on sugar sweetened drinks will increase from 5 cents to 10 cents a litre.

There will be no more duty on sanitary pads, tampons, diapers and wireless modems.

Duty has also been reduced for perfume, jewellery, beauty or makeup preparation for care of skin, pre-shave, shaving or after shave preparations, cameras and camcorders, sunglasses, video and electronic games, watches, Ipods, MP3 and MP4 players from 32 percent to 15 percent.

Duty will also be reduced for deodorants from 15 percent to 5 percent.

There will be a complete elimination on duty for bicycles.

There will be a ban on the importation of used tyres from 2017 while duty on new tyres has been reduced from 32 percent to 5 percent.

Duty has also been reduced on mini buses carrying 10 to 22 passengers from 32 percent to 5 percent.

The Finance Minister says all new motor vehicles being brought in should be Euro 4 compliant.

Used unleaded and diesel vehicles to be imported must be up to 5 years from the manufacturing date.

Stamp duty has been exempted for all Small and Micro Enterprises.

Duty rates have been increased for imported solar batteries while the Credit Card Levy will be increased from 2 percent to 3 percent.

A Downtown duty free shopping will be introduced in 2016. The shops have to be accredited by FRCA. This will be another attraction for visitors.

Tax free zones will be extended from Nausori airport to Matawalu River in Ba. This is to encourage businesses to start operations in this zone.

There is also a 150 percent tax deduction for foreign companies setting up their headquarters in Fiji while a 50 percent tax deduction is offered to businesses that supply Fijian made uniforms to staff provided the money is not recovered from the staff.

The 30 percent duty on powdered milk will also be maintained to protect the local dairy industry.

Sayed-Khaiyum says half a billion dollars has now been declared after the announcement of the amnesty period for overseas asset declarations this year. Taxes have to be paid in Fiji by Fijian citizens owning assets overseas.

A similar amnesty will be offered for assets held in Fiji that have not been declared by individuals.

The Finance Minister calls on people to make the declarations now as FRCA will come down hard on them.

He says a major grocery outlet which has supermarkets all over Fiji has not paid any taxes in the last 6 years. The outlet is also claiming that it has not been making any profits.

Sayed-Khaiyum says the Fiji Revenue and Customs Authority will invest $5 million to ensure better reporting and tax compliance. All cash registers will also be connected to the FRCA system to monitor sales and taxes due.

The Finance Minister says the 2016 National Budget makes a bold statement - Your government believes in you.

He says Fiji has enjoyed 4 years of economic growth of more than 4 percent.

Government revenue has gone up from $1.4 billion in 2006 to $2.6 billion in 2015, this is apart from the sale of government assets.

The government expects $3.12 billion in revenue for 2016 while the total expenditure is expected to be $3.4 billion.

The capital to operating expenditure mix is expected to be 60 percent for civil service operating expenditure and 40 percent for capital expenditure.

Fiji Ports Corporation will develop a new port development master plan after the divestment of 59 percent of shares to FNPF and Aitken Spence.

Sayed-Khaiyum says government shares will also be divested in FEA and Airports Fiji Limited.

A Civil Service Reform Management Unit has been established - $1 million allocated for this in 2016.

A Ministry of Civil Service will be established on January 1st next year.

It has been confirmed that PSC staff will be redeployed to other ministries.

Positions for the Ministry of Civil Service will be advertised soon.

The government will also carry out reforms on procuring medicine as a lot of medicine is discarded after their expiry causing a loss to taxpayers of the country. A consultant will be brought in to ensure the proper procurement of medicine for the country.

All Public Sector tenderers from 2016 have to be fully tax compliant.

Fiji Airways will commence a new route to Singapore soon.

$18 million has been provided to Fiji Airways in the 2016 National Budget.

The government will also subsidize a total of 395 domestic air travels.

The Legal Aid Commission will open new offices in Levuka, Kadavu, Nabouwalu and Rotuma in 2016 to take these services closer to the people.

From 2016, a 10 year tax holiday will be offered for investors who set up private hospitals in Fiji.

$280 million has been allocated to the Ministry of Health. This is an increase of $11 million.

$9 million has been allocated for 150 new doctors and 200 more nurses to be recruited in 2016.

The Ministry of Education will get $432.2 million next year. 250 new teachers are expected to be hired next year to improve the student teacher ratio in classrooms.

The base salaries will also increase for teachers.

The base salary for primary school teachers will be $16,610 while the base salary for secondary school teachers will be $23,411. 

$7.9 million for allowances for teachers who go to remote areas.

Another $19 million has been set aside to support the 3 technical colleges established this year and 8 technical colleges to be opened in 2016.

The free milk program will continue to be funded with an allocation of $3.6 million.

The Tertiary Education Loan Scheme and National Toppers Scheme will continue in 2016.

Good news for the people of Ba and Nadi as full Births, Deaths and Marriage services will be provided in Ba and Nadi for the first time.

The Ministry of Justice is also working on the digitization of records.

Money has also been allocated for the hire of an additional 105 Fiji Corrections Services officers.

There will be duty concessions on materials to attract private sector investment in building affordable housing units.

$2.6 million will be allocated to build 36 rental flats in Lautoka while $500,000 has been set aside to subsidize the TLTB lease payments of struggling tenants.

$52.2 million has been allocated to the Ministry of Women, Children and Poverty Alleviation.

$22 million has been set aside to assist the needy with food vouchers.

Funding has also been increased for the Social Pension Scheme from $8 million to $13 million. The eligibility age will be reduced from 68 years to 66 years from July 2016. This is for people who do not receive any other form of pension.

The National Fire Authority will be allocated $4 million to purchase fire trucks, upgrade equipment and build a fire station in Nabouwalu while $900,000 has been allocated for more fire hydrants in the country.

Garvey Park will be extended while the first ever public swimming pool will be built in Lautoka.

A stadium will also be built in Valelevu.

New LTA offices will be set up in Nabouwalu, Lekutu and Bua.

The Fiji Roads Authority has been allocated a record $635.7 million to upgrade and repair roads around the country.

100 bridges are in danger of collapse and need to be repaired.

$79 million has been allocated for maintenance of roads around the country.

FEA to establish a depot in Taveuni to supply power in Taveuni including Somosomo.

$5.6 million has been set aside for street lighting in the rural areas. This is for many settlements and villages around the country.

The government will also fully fund the extension of the electricity grid and people do not have to pay the 10 percent contribution. This is for the people who are not on the electricity grid.

The Water Authority of Fiji has received an increased allocation of $176.3 million.

$11.2 million has been allocated to state broadcaster FBC. $6.6 million is for radio public service broadcast and $4.6 million for TV public service broadcast. Their previous yearly allocation was $2.9 million.

$2 million has been allocated to purchase Digital TV set up boxes.

Reactions:

The Minister for Women, Children and Poverty Alleviation Rosy Akbar says with the increase in their budget this year, it will allow them to expand their services.

The Fiji Chamber of Commerce President Peter Mazey says the reduction of VAT to 9% is a positive outcome for local businesses and consumers.

The Fiji Roads Authority CEO Neil Cook says their main focus will be developing rural roads and to give a balance of road services throughout Fiji.

FMF Foods CEO Ram Bajekal has welcomed the zero duty rating on raw materials.

SODELPA MP Aseri Radrodro says the reduction in VAT is good but more could have been done for rural communities.

NFP leader Dr Biman Prasad has welcomed the VAT reduction to 9 percent in the 2016 National Budget.

The Group Finance Director of C.J.Patel Ajith Kodagoda says the 2016 National Budget is a stable budget.

Finance Minister Aiyaz Sayed Khaiyum says the VAT reduction will benefit everyone despite the inclusion of VAT on some basic items.

Sayed-Khaiyum says the Ministry of Civil Service will be fundamentally responsible for the overall strategy regarding civil service in Fiji.

SPORTS

$22.5 million has been allocated to the Ministry of Youth and Sports.

This will include the assistance for teams taking part in the Rio Olympics, the Northern Hemisphere rugby tour, the Pacific Nations Cup and the Under 20 World Rugby championship.

$2.2 million has been allocated for the Crusaders vs Chiefs Super Rugby match to be held in Suva on the 1st of July next year. This is the first time ever for a Super Rugby match to be held in Fiji.

More good news as international golfer, Vijay Singh has confirmed that he will represent Fiji in the Rio Olympics in 2016.

$9 million has also been allocated for the Fiji International Golf Tournament in Natadola.

Meanwhile the FMF National Gymnasium in Suva will be upgraded next year as the Fiji Sports Council has received funding for this project.