Accountants Explain Their Decision
‘The FIA places a focus on growing the Fiji economy by increasing investment, creating employment opportunities and generating economic activity.’
The Fiji Institute of Accountants (FIA) has defended its decision to recommend national budget changes, such as an increase in Value Added Tax, and a pay cut for civil servants.
Reforms take time, said institute president, Pravinesh Singh, after some public criticism was cited over certain aspects of the institute’s submission to the national budget.
“The question now is, where else can the Government derive revenue to meet its expenditure and the needs of our people, especially those who have been badly affected by COVID-19,” he said.
“The revenue options are limited.”
Mr Singh said the FIA’s annual budget submissions took a holistic approach to cover Fiji’s broader economic situation, while considering any immediate changes required.
“It takes time, sometimes years, to bring about reform,” he told SunBiz.
“Our experience indicates that issues we raise in our submissions, may be accepted in the current year, while other matters may be deferred to future years,” Mr Singh said.
“The FIA places a focus on growing the Fiji economy by increasing investment, creating employment opportunities and generating economic activity.
“This includes suggestions to increase Government revenue, rationalise Government spending and operating costs, and improve the ease of doing business in Fiji.”
Mr Singh said FIA’s submissions focussed on Fiji’s tax and other policy and legislation, which affected the cost and ease of doing business in Fiji.
“This year’s submission focused on post COVID-19 recovery measures,” he said.
“Issues highlighted in previous submissions which may not have been previously addressed were also reiterated.”
VAT
The institute submitted that Value Added Tax (VAT) be increased to 12.5 per cent.
In its national budget submission, the institute wrote: “Remove the Environment and Climate Adaptation Levy (ECAL) on turnover, and increase VAT to 12.5 per cent. This will provide a broader tax base coverage and increase government revenue, while simplifying the tax regime by further reducing the number of different taxes. This will make compliance costs more manageable and allow businesses to focus on carrying out their business activities.”
VAT is a broad-based tax, Mr Singh said.
Most VAT-revenue was derived from higher income earners because of spending patterns, he said.
“There are avenues that may be considered by the Government to assist the disadvantaged, while increasing VAT to 12.5 per cent,” Mr Singh said.
“This will ensure that Government revenue is increased, while still catering for the interests of the disadvantaged in the community.”
VAT is the Government’s major source of revenue and is likely to reduce further due to the reduction in economic activity in Fiji, Mr Singh said.
Other revenue sources, such as Income Tax, were expected to reduce significantly, he said.
“The impact on revenue from income taxes is expected to carry forward into future years, as companies can claim and offset tax losses against its future taxable income,” Mr Singh said.
“Government revenue from Customs Duty is also expected to reduce significantly following the unexpected reduction in duties for a wide range of items in last year’s Budget.
“Our submission included a suggestion to review certain import duties to provide assistance to local manufacturers, while increasing customs duty revenue for the Government.
“Furthermore, Government revenue from the Environment and Climate Adaptation Levy has been affected due to the downturn in tourism and the hospitality sector.”