Value Added Tax or VAT has been drastically reduced.
Government has announced a reduction from 15% down to 9%.
This comes into effect from January 1st.
Basic food items, prescriptions and pepeats, kerosene and imported fish supplied to fish processors that used to attract zero rated VAT have been removed.
“VAT will be reduced from 15% to 9% and exemptions currently exist on rice, cooking oil, fish, flour, powder milk, kerosene and prescription drugs will be eliminated. This reduction in VAT will reduce the overall cost to citizens as measured by the consumer price index through the RBF by 4.5% and it will overall reduce the overall cost of food to all Fijians by 0.4%. We will further reduce the impact of VAT on the poor by continuing the Free Food voucher and free medication for individuals with income less than $20,000 a year and providing subsidized electricity of up to 95 kwh to those households that earns less than $30,000 and are aligned to the $30,000 threshold for WAF,” highlighted the Minister for Finance, Aiyaz Sayed-Khaiyum at the 2016 Budget Announcement.
Shadow Finance Minister Dr Biman Prasad has welcomed the vat reduction.
However, Prasad had some concerns on the 2016 Budget including the level of borrowing by government.
“We welcome the deduction in VAT that we vigorously kept going for in 2014 Elections and something the Fiji First Party vigorously opposed. However, we are concerned about the removal of the basic food items exempted from VAT and we will also be looking at other tax and revenue measures that government has put in this Budget,” said Dr. Prasad.
Government anticipates a loss of 316 million dollars in revenue by reducing VAT.