‘Dropping VAT to 9% Would Cost Fiji $600m in Revenue’: Biman
He said Opposition Members of Parliament forgot that when they were in Government, they had VAT which was 15 per cent with no exemption.
Thursday 11 July 2024 | 10:10
Minister for Finance Biman Prasad outside Parliament on July 10, 2024. Photo: Ronald Kumar
Minister for Finance Biman Prasad yesterday explained that if Government drops Value Added Tax (VAT) from 15 per cent to nine, Fiji would lose $600 million in revenue.
While delivering his right of reply in Parliament yesterday, Mr Prasad said reducing VAT was not an option now.
“If we reduce VAT from 15 to nine per cent, we will lose $600 million in revenue,” Mr Prasad said.
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“For every one per cent reduction in VAT, we lose about $100 million tax revenue. The question is, how are we going to compensate for this?
“Are we going to increase the fiscal deficit to double digit and get $600million in loan? Or are we going to reduce expenditure by $600million? It is easy for them to come here and say that we should reduce VAT without saying how we fix the revenue gap.”
He said Opposition Members of Parliament forgot that when they were in Government, they had VAT which was 15 per cent with no exemption.
“When we increased VAT from nine per cent to 15 per cent in the last budget, we did a thorough analysis, explored different options, consulted with different experts and discussed it with our multilateral partners,” Mr Prasad said.
“We knew it was not an easy call, so, we had to get it right. Despite the fact that there is no VAT on 22 items, the prices had increased due to increase in production costs or other associated costs such as freight, insurance, storage, etc, which are completely be out of our control,” he said.
“As a Government, we have looked at all these options and the Minister for Trade, under which FCCC comes, is constantly looking at how we can use some of these tools, some of these policies to provide relief to our people. That is being done and I am sure the DPM will be making some of those decisions soon.”
Mr Prasad said Fiji’s major trade partners were experiencing high inflation rates. He explained that due to these trade links, it was natural for import prices from other countries to be high, which significantly impacted Fiji.
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