The chair of the Fiscal Review Committee Richard Naidu has recommended an increase in Value Added Tax, however, says it should not be higher than 15 percent.

While presenting the committee’s finding during the National Summit in Suva this morning, Naidu also stated that the government also needs to take the zero VAT rating away from the basic food items.

He adds the Fiji Revenue and Customs Service is losing millions of dollars in revenue from this zero rating.

“At nine percent FRCS is telling us that it is costing them a $160m a year and of course who benefits the most from that zero rating. It’s mostly people in this room. We can afford more money. We can afford to buy more basic items, more flour, more rice, and more cooking oil than the poorest people. So we are getting the benefit of that.”

The chair of the Fiscal Review Committee Richard Naidu while presenting the committee’s finding during the National Summit

According to the World Bank Fiji’s standard VAT rate is amongst the lowest in the region and third-lowest among bench-mark countries.

The World Bank has also stated that multiple rates and a growing list of zero-rated items complicate the system and erode its revenue potential.

From April 2022, a higher 15 percent rate has been applied on selected goods and services, however, zero rating has also been extended to an additional 21 items.

Naidu says what the Review Committee is recommending is that they want the government to drive taxation using principals, sustainable revenue, fairness, equity; simplicity and also certainty, predictability and transparency.

“We have to re-target that money – so that certainly is our recommendation. So it is not just about increased welfare spending, but it’s actually targeting those lower income households. And finding a way to deliver cash back to them, if we are going to increase VAT making the while process more equitable.”

Naidu says they do not recommend any changes to personal income taxation.

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