A Deceptive Budget

  • 6th November 2015
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Budget 2016 imposes 9% VAT on basic food items and prescription medicine that were previously not subject to VAT.

Denouncing the move as insensitive, Labour Leader Mahendra Chaudhry said it is a blow to the poor.

“The imposition of 9% VAT on basic food items will now force 45% of our people who live in or on the verge of poverty to pay more for food and medicine from their meager incomes,” he said.

“It is a highly insensitive move against the poor who spend a large part of their income on putting food on the table for their families.”

“Why was it not possible to reduce VAT without hitting food and medicine?” Mr Chaudhry asked. “After all, it is VAT/GST free in Australia, Canada, New Zealand, United States and the UK. Why can’t it be so in Fiji?”

VAT is a uniform tax paid by all, irrespective of their incomes and penalises the poor. This is why in 1999 the Labour Government removed VAT from basic food items to provide some relief to the poor from the 10% VAT imposed by the Rabuka Government.

“People must understand that reconfiguring the tax net is a ploy to rake in more revenue by shifting the burden to other sectors of the economy.

In the instant case, and in the Finance Minister’s own words that there will be no loss of revenue, as it will be more than recovered by making basic food items more expensive.

Indeed, he has calculated that he will net more revenue by charging VAT on basic food but needed a ploy to sell it to the people by offering a reduction elsewhere.

The doubling of STT (Service Turnover Tax) from 5% to 10% was, no doubt, conceived as another revenue boosting measure.

A host of other revenue measures – increases in existing rates of fee, charges and levies will all add to business costs which will eventually be passed on to the consumers thus pushing up prices and fuelling inflation.

The marathon 2016 Budget address by Finance Minister Aiyaz Khaiyum was replete with rhetoric on promises of good things to come as a result of proposed reforms contemplated by the FF government.

The Minister appeared to have forgotten that the FF has been in charge of the country, as a military backed government for the last 9 years, when he laid blame on previous governments for things gone wrong since the coup of December 2006.

The Minister’s castigation of the business community generally and the threats uttered against them is unfortunate. It will act as a deterrent to future investment. He seems to have targeted certain business houses for what he claims as improper and fraudulent practices on their part to deprive the Treasury. While there may be some substance in his claim, the accusing manner in which he warned the entire business community is contemptible and counter-productive.