IMF recommends extensive reform of Fiji’s tax strategy

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IMF Mission Chief to Fiji, Marshall Mills addressing the media at a press conference at RBF, Suva, on Wednesday, March 22, 2023. Picture: ELIKI NUKUTABU

The International Monetary Fund (IMF) has recommended an extensive reform of Fiji’s tax strategy which could increase revenue generation for the government.

IMF’s Mission chief for Fiji, Asia and Pacific Department, Marshall Mills said the team was of the view that increasing VAT was one of the best ways to assist in rebuilding the revenue stream of government.

Mr Mills said no one liked to pay more taxes but in order to put public finances on a sound footing and maintain the level of spending that was needed in the economy, they’ve recommended emphasizing the revenue side.

However he said the team was of the view that it should be part of a comprehensive tax reform strategy that increased the efficiency and simplicity of the system.

He said while they were aware that increase in VAT would affect the prices of some basic goods, they would advise the government to counteract this increase, with increased transfers to the most vulnerable and other efforts to improve inclusion, training and financial production, using digital tools.

“We feel the tax revenue increases are not going to require going beyond historical tax rates.

“And probably in most areas, even lower rates than were the case just a few years ago, so this is not going beyond where it was before.

“It’s predominantly reversing changes that have been made in the past, especially three years, five to six years as well.

“So we feel that this is not going to be too burdensome for the economy as a whole effect growth significantly,” said Mr Mills.

The group had also discussed some approaches with the government and other stakeholders in terms of social inclusion and assistance with emphasis on the fact that this effort could be ongoing and it would benefit all of Fiji to improve this inclusion.

“The government is also engaged in a broad consultative process through the Fiscal Review Committee, its plans for the economic summit and the publication of the medium term fiscal strategy.

“Given the need to raise revenue, businesses are unsure of what the tax regime will look like so we look forward to the budget clarifying the tax regime we’ve advised the government to have and this will increase confidence and reduce uncertainty for businesses.”

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