Fiji Labour Party Leader and former Prime Minister Mahendra Chaudhry has rejected the recommendations of the Fiscal Review Committee for Value Added Tax (VAT) to be increased to 14 per cent.
Chaudhry said the 14 per cent increase will be a severe blow to the poor – particularly families on low income levels, who constitute almost 70 per cent of the population.
He warns that this recommendation if implemented will drive more people into the poverty net and most of the recommendations in the Fiscal Review Committee report favour the rich.
“The Fiji Labour Party rejects the recommendation by the Committee for a flat rate which removes the current VAT exemption from basic food items, medicines, baby food and 21 other household items.”
Chaudhry argues that the $500 million in revenue the Committee says it will generate is debatable, viewed against the additional government expenditure that it will entail and it is also highly likely that most of it will be spent in the unproductive sectors of the economy.
He said the recommendation is counter-productive as sharp increases in living costs will lead to renews demands for salary and wage increases, creating an inflationary spiral.
“The FRC has not considered removing the anomalies in taxation that favour the wealthy-like taxing dividend income or increasing the personal tax rates applicable to those earning over $50k or hiking the capital gains tax.”
“Overall, the recommendations of the report have political implications the Coalition must seriously consider. It would not be in their best interests to jettison their campaign promises to bring down the cost of living, by adopting a short-sighted Report likely to create more problems than it will solve,” he added.