Reverting the Value Added Tax (VAT) rate to 15 per cent from the current 12.5 per cent will be a “last resort” measure, said Minister of Finance Esrom Immanuel.
The suggestion for that change was made by the International Monetary Fund (IMF) in its latest Article IV Mission to Fiji, in which it assessed Fiji’s budgetary position as having “very little room” to accommodate unexpected costs.
“The budget passed last year leaves the Government with very little room to handle unexpected needs for extra spending,” IMF team leader on the 2026 Fiji Article IV Mission, Alasdair Scott wrote in his preliminary report.
“While the economy now faces higher fuel prices, in the future it could also face natural disasters or new global shocks.
“The challenge for fiscal policy is therefore to rebuild fiscal buffers with growth-friendly reductions in deficits, while managing higher costs of living.
“This could be facilitated by a reform package of revenue mobilisation — building on excellent progress on compliance by the Fijian Revenue and Customs Service, but also including restoring the VAT rate to its previous rate — and expenditure rationalisation.”
While not ruling out VAT a increase completely, Mr Immanuel said other less drastic options could be explored.
FRCS chief executive officer Udit Singh said any change in VAT or any other tax was a policy decision if it came forward but in case there was such a change, their systems were equipped to handle it.
“There are no issues with our system.
“If rates do change, then we’ll obviously have to make some preparations and get ready for it. We’re always on stand-by for any policy changes. That will come through in the budget round and everybody will get enough warning in terms of what needs to be done,” Mr Singh said.
VAT was reduced from the earlier rate of 15 per cent to the current 12.5 per cent in the last budget, which resulted in a reduction of $250million in tax revenue.
