National Federation Party categorically DISAGREES with the following claims by Fiji First candidate Mahendra Reddy and the Fiji First Party
Claim 1: VAT will not provide relief to the poor
• It is true that VAT is zero on tinned fish, flour and sharps, powdered milk, edible oil, rice and tea. However, a typical poor household does not only consume these items. A typical basket for any poor household also includes consumption of electricity bill, water bill, mobile phone recharge, frozen meat, bread, processed food such as noodles, transportation and entertainment.
• Rich consume more fresh meat products (such as fish, goat, chicken) while poor totally depend on supermarket for meat (tuna, lamb neck, frozen meat).
Claim 2: Reducing VAT from 15% to 10% will reduce VAT revenue by 33%
• It does not necessarily mean that reducing VAT by 5% will reduce VAT revenue by 33%. VAT is a consumption based tax. As prices go down after VAT reduction, consumption expenditure is bound to increase which will also increase the tax base. The revenue that would have come to the government will now go to into the pockets of the people.
• It should also be noted that between 2012 and 2014, VAT revenue increased by F$160m. During this time, there was no increase in VAT rate. This is evident that VAT revenue is not totally dependent on the VAT rate but the rate of economic activity as well.
Claim 3: Reduction in VAT will reduce government expenditure on roads and hospitals
• NFP does not see any connection between VAT revenue and the expenditure to provide good roads and quality health services to our people. The statement by the Fiji First Party is totally flawed. NFP will be guided by a medium to long term infrastructure plan for our roads and hospitals.
• NFP will reduce wastage of government financing through efficient checks and balances and ensure the productive use of government revenue.
Dr Sunil Kumar
Economy, Finance & Trade