Opposition to VAT proposal

FIJI Government plans to introduce the value-added tax (VAT) and change labour laws came under attack at the National Economic Summit in Suva last month.

Opposition centres around claims that the new tax would hit the poor, particu larly in the outer islands, and that abolition of the Wages Council was likely to lead to worker exploitation.

Finance Ministerjosevata Kamikami ca announced exemptions to the VAT, including all farming income, all unpro cessed foods, housing rents, financial services, businesses which turnover less than FS 10,000 (USS67IO), public trans port by bus, all agricultural land and exports. The tax will apply to sales to tourists, all imports, municipal rates, purchases by government departments, management and advisory sendees and barter arrangements.

But there was considerable pressure from those attending the Summit that the Government should not go ahead with the tax. One speaker complained that the people in rural areas would suffer most from a 10 per cent increase in the price of consumer goods, and that those in outer islands already were paying extra to receive goods shipped from Suva.

Church social worker and author of a report on poverty, Fr Kevin Barr, said after the summit that low income earners

down to those who receive welfare assistance would be most adversely affected by VAT and would “continue their gradual decline into deeper pov erty”. But the Government’s proposal to raise the tax threshold should be of some benefit to low-income earners, he said.

Opponents of the proposed tax have complained that the Government has not specified the amount by which income tax would be lowered to compensate for the shift to more indirect taxation.

Taxation Commissioner Tui Mailekai told the conference that the public had until July 31 to make submissions on the VAT plan the tax comes into effect in mid-1992.

A communique issued after the sum mit said it was recognised that the VAT had significant long-term economic and social advantages. It added that the Government would take measures to protect disadvantaged people.

Both welfare and business speakers argued for the retention of the Wages Council. Businessman Robert Lee said the present wages system allowed for negotiations and the free movement of labour. Meanwhile, the Fiji Trades Union Congress said it would fight any government attempts to strip the union movement of its rights. The FTUC was reacting to Government proposals to change labour laws. □