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FRCA: Value Added Tax Plays Plus Role in Public Finances

VAT is playing a significant role in the public finances of the country in the area of tax, says an executive of the Fiji Revenue and Customs Authority. Fazrul Rahman,
13 Aug 2014 13:52

VAT is playing a significant role in the public finances of the country in the area of tax, says an executive of the Fiji Revenue and Customs Authority.

Fazrul Rahman, National Manager – Policy Economic Analysis & Research of FRCA stressed this to participants at the Fiji Economy Update 2014 yesterday.

“VAT is proving to be a dominant source of government revenue and we have maintained the integrity of the VAT system from the day it was introduced,” he said.

“VAT itself is a tax system that incorporates the neutrality concept which means that VAT is not going to cost the business.

“This basically means businesses are neutral from VAT burdens as businesses can claim VAT they paid and will charge VAT to customers on final product.

Burden on customers

Mr Rahman said any concerns around low income earners and the economy can be addressed through various means.

Mr Rahman was questioned regarding how could he justify the same amount of VAT being paid by a low-income earner and a high-income earner.

He stressed: “Of course in theory VAT is a regressive tax. The basket that is spent by low income earner and the rest of the basket is spent by high income earners.

“In that regard, VAT is a regressive tax. But we must look at VAT in totality, not in isolation.”

He said since the introduction of VAT from day one and ever since the VAT increased, there has been a corresponding adjustment to the personal income tax system.

This, Mr Rahman, said was through increase in tax threshold or at the same time, reduction in customs duty.

Mr Rahman highlighted a “rich man’s tax burden” which is compounded through a Social Responsibility Tax which is something which exists only in Fiji.

“Further, low income earners, relative to high income earners, does not mean are paying more,” he said.

“Because if you look at it, the other spectrum is paying a Social Responsibility Levy.

“Somebody earning $1 million, in addition to paying 20 per cent normal tax rate, is burdened with paying $197,900 plus 29 per cent of excess over $1 million.”

Therefore, Mr Rahman said the message was he understood VAT is a regressive tax.

“But alternatively, in Fiji, Government has responded that income tax threshold went up, tax rate came down, Social Responsibility Tax was introduced, customs duty went down,” he said.

“At the same time, Government through expenditure mechanism, has increased its contribution to the low income earners through social welfare provision.”

Economy growing

Mr Rahman reiterated that the Fijian economy is growing.

“My message is that if we look beyond 2014, the picture is very positive,” he said.

“I can zero down to every single person, every single company, single individual to validate that ‘yes the economy is growing’, what’s happening on the ground is growing.”

Mr Rahman said the total number of sales made by companies about four years ago was about $6 billion.

And today, Mr Rahman said this was about $12 billion in 2013.

“This shows that things are looking well on the ground. The tax is really reflecting what the Reserve Bank has forecasted,” he said.

Feedback : rachnal@fijisun.com.fj




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