By: Mika Loga – FIJI ONE NEWS – MONDAY AUGUST 11, 2014
As the debate on Value Added Tax rages on, at least one economist says, it is still possible to further reduce VAT on essential items not in the list of controlled items by the Commerce Commission.
The University of the South Pacific’s head of of economics, Professor Satya Pau says, a reduction could still be beneficial to both consumers and the government.
USP academic Professor Satya Paul shares his views on VAT as debate on the issue heats up leading into the polls.
“This tax is not pro poor. It doesn’t help the poor because everybody pays the same tax. It’s not a progressive tax as it is a regressive tax,” says Pofessor Pau.
There are some items where VAT are charged and the retail prices are fixed by the Commerce Commission.
These are referred to on supermarket shelves as controlled priced.
Certain political parties have proposed a reduction in VAT to 10 percent.
This has resulted in strong debate amongst political parties.
“You reduce 15% to 10%..in that case, it doesn’t mean one third..it does mean the revenue will decline by one third because when you reduce the price, the commodities become cheaper, people demand more, they spend more and the Government collect more taxes at 10%. This is the logic of bringing it to 10 percent,” says Professor Pau.
Another political party has proposed other ways of resolving VAT by subsidising the prices of an approved list of VAT free basic items.
“I dont think think this will do it, they should bring it to 10% or 11% whatever the fugure is consensus to the whole of Fiji. Then the Government can increase the income tax a little say around 20%,” added the USp head of economics.
There are certain items however, that are not scrutinised by the Commerce Commission. They include some canned goods which are essential food items in almost every home.
Either way, it will be a balancing act for any Government when it comes to taxes on basic food items.
“In this case the Government has to be very careful which are the items coming very cheap, in that case Government can impose some of the taxes on the imported goods so that the domestic market becomes stronger,” says Professor Pau.
On the street, the views differ.
“Governmment should reduce the price of the items because the income is so less, the things are going up,” said one consumer.
“As I see it, the prices of items this week are still the same. They are still sold at reasonable prices..people like me can afford it,” said another consumer.
Whatever the proposed political solutions are to VAT, ultimately it’s consumers who will decide how it impacts their pockets.