Update: 1:20PM THE Government has reduced Value Added Tax (VAT) from 15 per cent to nine per cent, however, the zero duty allocated to basic food items and certain medicines has now been removed.
Minister of Finance, Aiyaz
Sayed-Khaiyum today announced the Government’s $3.4billion budget for 2016,
themed A Strong Fiji, A Fair Fiji, A Healthy Fiji.
Government’s
revenue expectations total $3.1bn of which an estimated $2.6bn will be from
taxes through the Fiji Revenue and Customs Authority.
Net deficit
is $285m, including $159.6m in debt repayments bring the gross deficit to
$445m.
While the
cost of goods and services should decrease from January 1 due to the reduction
in VAT, the cost of flour, cooking oil, dhal, kerosene and tinned fish and
certain medicines will now increase.
The loss of
revenue to the Government due to the reduction in VAT is estimated at $316m.
Government is expected to recover this from the $108m expected from VAT
medicines and basic food items.
An
additional $127.5m is expected to be earned from the increase of Service
Turnover Tax from five per cent to 10 per cent as well as a new environmental
levy of six per cent.
As
recommended by the IMF, the Government is also improving tax compliance, which
should give a further $120m to the state coffers.
Government
is expected to fund its deficit through domestic borrowing through the Fiji
Infrastructure Bonds and Viti Bonds.
As part of
its debt policy, the Government says it will adhere to limit its borrowing
limit to avoid chances of higher debt and that it will manage its
contingent liabilities by minimising defaults and ensuring
adherence to guarantee requirements.
