The SDL government dealt a severe blow to the pockets of the poor by raising the goods and services tax (VAT) to 12.5% in its 2003 Budget tabled today.
The 25% increase in VAT from a previous 10% will mean the price of basic food items will soar as will the cost of water, electricity, fuel and telecommunications.
The Fiji Labour Party has branded the 2003 Budget as bad news for every body. It is an anti people budget designed against a backdrop of gross financial mismanagement and abuse.
“It is bad for the economy and for businesses. It hits the poor and the marginalised in our society and will make life even harder for them,” Labour Leader Mahendra Chaudhry reacted.
An increase of 25% in Value Added Tax (VAT) raising it from 10 – 12.5% will have a crippling effect on all sectors of the economy.
This budget is snatching food away from the mouths of the poor and the disadvantaged by increasing VAT on food items. People must now regret having voted SDL which is showing its true colours as a party of entrenched interests, with no time for the ordinary people.
It is cruel to increase taxes at a time when there is widespread suffering, with almost 50% of our people living in poverty. Government’s need for additional revenue can be satisfied if it were to make serious efforts to collect some $150 million dollars owed to it in taxes and other charges. It should crack down on tax evaders and not hit the poor to raise additional money.
The trebling of sugar export tax from 3 – 10% will penalise cane farmers by reducing their incomes substantially. This industry is already in deep trouble. Reduced-incomes will see more farmers pulling out thus hastening its demise. As it is, farmers are struggling to survive in a situation of rising production costs and depressed sugar prices.
Tax increases and duty hikes will discourage investment. It will substantially increase the cost of goods and services which in turn will fuel inflation. Charges for electricity, water, fuel and telecommunications will rise by 2.5 %.
Increased prices against a backdrop of depressed incomes will erode consumer demand with adverse effect on businesses. The cost of running businesses will increase, hitting the bottom line. As a consequence, businesses will be forced to cut costs. This could mean job losses, leading to a further worsening of our already high unemployment rate.
The increase in VAT will drive more people to do business in the black to avoid paying 12 ½ % to government. That happens when people are pushed too far, they will find a way out.
The gross deficit of $315 million in 2003 is a cause for alarm and a sure sign of irresponsible spending.
A major reason for tax and duty hikes appears to be the bankrupt state of government finances. The SDL government has rendered the treasury empty through mismanagement, abuse and corruption.
The performance of this years (2002) budget to September 30 shows the government is borrowing heavily – it had borrowed $241 million in the first nine (9) months of this year to stay afloat. Budget deficit as at end of September stood at $180 million dollars.
Spending on capital works was only $121 million against a budgeted provision of $283 million. Direct tax collections were down 23% at $193 million against a budgeted forecast of $244 million.
These indicators go to show that the SDL government is long on promises but short on delivery.