Govt would probably collect about $200 to $220m if 0% VAT on basic items is taken off – Naidu

Our recommendation is unfortunately, VAT will need to go up but not for the personal income tax threshold to come down.

This has been highlighted by Fiscal Review Committee Chair and prominent lawyer, Richard Naidu while speaking on fijivillage Straight Talk with Vijay Narayan where he says when there is zero percent VAT on basic items, poor people pay less but so do those who earn more.

He says for people who earn more, their money should go to the government to ensure that money can be used to target assistance to the poorest people.

Naidu says if zero rating is taken off basic items, the government would probably collect about $200 to $220 million depending on what the VAT is.

Naidu says people are saying not to increase VAT but to increase the taxes on the rich and the government will get the money they need but there are 161,000 people who file their taxes with FRCS however, 21,000 people pay personal income tax.

He says this is because of the high income tax threshold where anyone earning under $30,000 keeps their income but there are only 21,000 people left to pay their personal income tax.

Naidu says this raised about $200 million a year but VAT on the other hand makes between $800 and $900 million a year and customs makes about $400 million a year.

He says when you say to tax more people, there is no one to tax.

The lawyer says they are not recommending the personal income tax threshold to come down because if it goes down from $30,000 to $20,000 then the government will make about $55 million a year.

He says this is a very small sum of money for the pain they will be putting on people.

When questioned if they have looked at wastage where before the elections last year, Deputy Prime Minister and Minister for Finance, Professor Biman Prasad had said wastage was close to $500 million a year and the Leader of Unity Fiji, Savenaca Narube had said it was close to a billion dollars , Naidu says they have to get in and see what can be fixed.

He says the committee tries but they have not drilled down to the last detail.

Naidu says in some ways they have to spend more money to save it.

When questioned what is her assessment on this, Fiscal Review Committee Member and Executive Director of Fiji Council of Social Services Vani Catanasiga says if increasing the VAT makes the system more effective, she is all for it as it is a good time to improve social welfare and protection in Fiji.

She says even when the social welfare programs are being implemented now, there are many left out who should be on it.