VAT recommendation

The Fiji Times (26/06) reported few recommendations made by the Fiji Institute of Accountants, for the upcoming 2021-2022 budget.

Firstly, I believe the FIA’s proposal to raise VAT from 9 per cent to 12.5 per cent is absurd and downright callous as the recommendation, which is purely a financial perception, insanely lacks social empathy from just every angle.

It obviously disregards the potential adverse impacts on the working class and the poor alike, who undoubtedly form the substantial portion of Fiji’s population and are prone to spiral into further poverty if there is any price increase.

While the basic knowledge is that an increase of 3.5 per cent should raise eventual price by the same margin, the reality from past experience is that the eventual retail price increase is rarely proportional to the tax increase but instead can end up with multiple fold increases, often premised on crass commercial logic.

In comparison, tax or any other cost reductions literally end up with relatively meagre changes in selling prices!

In the nutshell, the institute is merely proposing more hardship for the masses, whose pockets are already battered and bruised. The elimination of ECAL, on the other hand, will not have much significant impact in reducing consumer expenditures as the tax is not applicable to all businesses.

To make up for government’s revenue during such pandemic-induced downturn, it is preposterous to choke money from the populace when options to reduce government expenditure on unnecessary fronts and tax levies on luxury goods may be a more practical suggestion.

Conversely, there should now in fact be a reduction in VAT of many essential items to provide some respite to the suffering masses. Secondly, FIA’s call to reduce civil service payroll may have some merit but, I believe, only if applicable to those earning in the upper half of the pay distribution, as opposed to pay cuts for all civil servants because the ones on lower income band would basically be constricted.

While the ministers, members of Parliament, permanent secretaries and other very senior civil servants have had pay reductions in 2020, I believe there is room for more pay cut for them and certainly for other senior civil servants on exorbitant salary packages. There are a number of meaningful ways to design the national budget, but afflicting more adversity on Fijians should never be part of the plan!

BIMAL PRASAD Newtown Rd, Wailoaloa, Nadi