New revenue reforms in the budget projected to raise a further $596.4 million in taxes

Based on the new revenue reforms announced in the 2023/2024 National Budget, the tax revenue projection takes into account 25 additional tax revenue of around $596.4 million.

According to the Ministry of Finance, this would increase the tax to GDP ratio to 23.4 percent compared to 18.5 percent in the current financial year.

The measures include the increase in net VAT collections of around $445.6 million from the alignment of the VAT rate from 9 percent to 15 percent whilst maintaining zero-rated VAT on 21 basic items with the addition of prescribed medicines to the zero rated list.

The Finance Ministry says the realignment of VAT rates will eliminate issues of ambiguity around the application of VAT, unnecessary administrative issues for businesses, boost revenue collections and remove the risks of non-compliance.

The VAT revenue foregone from the zero rating is estimated at around $237.6 million.

The increase in the corporate tax rate from 20 percent to 25 percent is expected to generate additional revenue of around $73.5 million; increase in departure tax from $100 to $125 from 1st August 2023 and to $140 from 1st January 2024 is expected to raise $30.8 million in additional revenue; and increase in excise duties on alcohol and tobacco products by 5 percent and an increase in excise tax of 5 cents per litre on carbonated/sugar-sweetened beverages is expected to bring in a further $7.6 million.

A domestic excise duty of 40 cents per kilogram or per litre and an import excise duty of 15 percent would also be levied on products such as sweet biscuits, juice, ice cream, snacks and sugar confectioneries.

The increase in the water resource tax rate from 18 cents per litre to 19.5 cents per litre for every litre of water extracted exceeding 10,000,000 litres per month, will also generate additional net revenue of $2 million after accounting for income tax foregone from water bottling.

Other tax reforms include the review of the customs concessions and tax incentives regime aimed at reducing costs, removing protectionism and harmonising the rates.

This is anticipated to contribute around $36.6 million in customs collections.

The Finance Ministry says in addition, duty concessions that are currently available for fuel, broadcasting and internet service provisions as well as for hotels and resorts involved in the importation of materials, furnishing and fittings and equipment that are not manufactured and available in Fiji, will be ceased.