IMF recommends tax reforms and assistance to vulnerable households

No one likes to pay more taxes but in order to put public finances on a sound footing and maintain the spending that is needed in the economy, the International Monetary Fund says they have recommended tax reforms and to offset this, targeted transfers to low-income households.

IMF Head of Mission to Fiji, Marshall Mills says they suggested tax reform measures include unifying the VAT rate at a slightly higher level, simplifying personal and corporate income taxes, especially by reducing tax exemptions and raising certain excise and tourism specific taxes.

He says the unification of VAT rates will affect the price of some basic goods and that is something that they have advised the Government to counter-act with increased transfers to the most vulnerable households.

Mills says when you are looking at vulnerable households, a small amount of resources could go a long way and their recommendation is to devote a half percent of the GDP to this effort on an ongoing basis.

He says the government could also invest in better infrastructure for these communities such as water and electricity, providing training, schooling, and incentivising ongoing schooling.

While responding to a question by fijivillage News on why there is an emphasis on revenue instead of reducing expenditure, Mills says they looked at revenue levels and spending levels and felt that spending levels overall were reasonable - more or less.

He says they do advise the government to better reorient spending to priority areas such as investment, inclusion, and social protection.

He adds the growth is dependent on a strong reform program which is underway and is also being elaborated by the government where there are efforts to enhance productivity, making workers more productive, cutting the cost of doing business, particularly red-tape, enhancing social inclusion by improved training, education, and they are also recommending an increase in transfers to the most vulnerable households that is very well targeted and meeting the economy’s investment needs.