5 Nov 2005

Fiji drops VAT on basic food

8:11 am on 5 November 2005

The Fiji government has removed the 12.5 percent Value Added Tax from basic food items in a major reversal of its earlier policy announced in its 2006 budget today.

The finance minister, Ratu Jone Kubuabola, says Value Added Tax will not be charged on rice, flour, sharps, tea and tinned fish as well kerosene used for cooking from the beginning of next year.

The Chaudhry government had removed this tax when it came into power in 1999 but the Qarase government re-introduced it and increased the previous 10 per cent rate to 12.5 per cent.

To increase revenue the finance minister has increased taxes on imported alcohol and tobacco products by 10 per cent, locally made soft drinks by five per cent and imposed a five per cent tax on all hotel room rates in Fiji's biggest industry - tourism.

A new tax of 10 per cent in addition to those currently existing will be imposed on all imported motor vehicles but the tax on mini-buses carrying eight or more people will be reduced.

Ratu Jone said a new five per cent tax in addition to existing ones would be imposed on white goods, electrical appliances and items described as luxury goods.

The total budget for next year projects expenses of US$900 million while revenue is expected to about US$780 million, leaving a budget deficit of US$120 million.

Education and health have again received the largest share of the budget allocations with US$180 million going to education and US$88 million to health.

The military budget has been increased to US$46 million of which US$10 million is for overseas peacekeeping duties.

The police have also got increased funding of US$42 million.

Ratu Jone announced tax exemptions for a number of industries including those setting up in Information Technology parks, Studio City zones and small businesses in agriculture, fisheries and forestry.

In a budget address that was much longer than usual, Ratu Jone spent considerable time highlighting what he said were the economic achievements of the five years the Qarase government has been in office.

Observers said this was an obvious pitch at next year's general election.