A significant increase in VAT is the only meaningful source of the increases in govt revenue - Fiscal Review Committee

As the country waits for the 2023-2024 National Budget announcement today, the Fiscal Review Committee has said that with limited opportunities in customs and excise duties, a significant increase in VAT is the only meaningful source of the increases in Government revenue required.

In their report to the government, the Committee says if a single rate of 14 percent VAT is applied, it raises an additional $500 million but they recommend that some of this can be applied in targeted income support to cushion low-income households for the consequences.

The Committee proposes broadly $150 million to be used for targeted income support.

They believe about $100 million is available by returning some duty rates, particularly on alcohol, to pre-COVID levels.

They say unfortunately, the Government’s options are narrow as only 20,000 Fijian citizens pay any personal income tax, the corporate tax increases they propose will, at $60-70 million, not significantly improve Government revenue, returning Departure Tax to $200 by 2025 adds $75 million to Government’s coffers.

The Committee says other sources of tax or duty revenue on tobacco, sugar products and other things are either already in the Government’s revenue net or, if increased, would only contribute marginally to additional revenue.

The revenue measures the Committee is proposing includes increased corporate tax to 25 percent (with some relief for corporate SMEs), increased VAT to between 12.5 percent and 15 percent with no zero-rating on essential items, increases in departure tax to return to $200 per passenger by 2025, increased customs revenue (particularly on liquor) and balanced by new expenditure measures including increased social welfare spending and targeted direct assistance to lower income households and increased capital expenditure on infrastructure and health.

Deputy Prime Minister and Minister for Finance, Professor Biman Prasad has confirmed that the zero VAT rating will stay where it is and the current rate of 9 percent VAT will increase.

Professor Prasad will deliver the National Budget address at 10am today.

We will have live coverage of the budget with continuing updates on our website, facebook, YouTube, TikTok and Twitter, fijivillage. We will also have updates on Legend FM and Instagram.

Stay with us as we will bring you updates and analysis of the budget and let you know how the budget affects your pockets, what taxes and duties will be increasing or decreasing, and how our tax dollars will be used to provide government services.