It cannot be business as usual, we are recommending VAT to increase to no greater than 15 percent but there will be re-targeted support for the poorer people.
That is the message from the Chair of the Fiscal Review Committee, Richard Naidu at the National Economic Summit today.
Naidu says the committee is recommending a significant increase of VAT to 15 percent but not greater than that, and he also says that the zero VAT rating on the basic items should be taken away.
He also says the 9 percent VAT, according to the Fiji Revenue and Customs Service is costing $160 million a year to the government.
Naidu says the high-income earners benefit from the zero VAT rating the most as they can afford to buy more basic items like flour, rice, cooking oil etc than the poorer people.
He says the plan is to target the lower income households and finding a way to deliver cash back to them.
Naidu says they are recommending that government leaves personal income tax pretty much as it is.
He stresses we cannot meaningfully address the challenges being faced without more money.
The Fiscal Committee Chair says they also want to drive taxation using principles which are sustainable revenue, fairness, equity, simplicity, certainty, predictability, transparency and no more budget policy by ambush. Naidu says there is no point doing this if we are not able to uplift the poorest people.
He says we have 200,000 people in poverty, we have 96,000 people on the welfare rolls but the targeting again is getting increasingly blurred.
He adds that human capital investment is needed now to make the next generation economically productive and we cannot wait.
Naidu says in order to make those people productive, we must invest in their health and education.
He says we are significantly underspending and under-investing on health and we will pay the price later.
The Chair says we also have multiple challenges in education.
Naidu also says looking at the ease of doing business rankings since 2008 – we have slid from 43 in the year 2008 to 102.
Looking at the ease of starting a business ranking – we slid from 87 to 163 and there are only 190 countries.
In the physical and capital investment space, Naidu says they have held discussions regarding the Land Sales Act, State Lands Act, electricity supply, Department of Environment and Department of Town and Country Planning and business process issues.
Naidu says some of these are not difficult fixes.
He adds that we need to have a look at the new Investment Act and how useful it is.
The Chair says we have to completely look at immigration – the retirement market, the market for nomads and using foreign skills as it is about bringing people in because they are economically useful to us and bringing in the skills.
Naidu further says that we need to look at the courts, dispute resolution and the wider justice system as we have to fix up our whole dispute mechanism system.
He says if they are not delivering results in a timely and efficient way, that is a clear disincentive to investment.
Naidu stresses that they are only recommending, they are not deciding, as the government will make the decision.
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