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Fijian Tax-Take Increasingly Reliant On VAT

by Mary Swire,, Hong Kong

27 August 2013

Fiji's Revenue and Customs Authority has released its annual report for 2012, which highlights the increasing importance for the territory of revenues from its expanded value-added tax in light of ambitious revenue targets for 2013.

The Authority highlighted that while it collected revenues above targets during 2012, the revenue collection target for 2013 of FJD1.852bn (USD974m) is ambitious.

The agency pointed out that in recent years the Government has managed to increase revenue growth significantly by shifting the tax base towards higher consumption taxes rather than income.

"Our revenue growth was 9.4 percent [in 2012], which was higher than that of the last decade average of 8.5 percent. This growth was achieved despite the massive tax cuts, which resulted in a direct loss of revenues of over FJD100m."

A number of tax concessions or incentives were announced in the 2012 Budget. The total value of tax concessions approved was FJD633m against the FJD354m approved in 2011, to support economic recovery.

The Chief Executive Officer of the Authority, Jitoko Tikolevu, underscored that value added tax has remained a dominant source of tax revenue in recent years, accounting for 39 percent of the tax base in 2012.

"This pattern of relying on VAT is not new, as similar revenue mixes were noticed 10 years ago (between the 2003-2012 period). In absolute terms however, VAT revenue in 2012 is significantly higher than that of 2003, by 82.8 percent."

"This remarkable increase reflects the growing taxpayer base as well as the impact of the increased VAT rate from 10 percent to 12.5 percent and then to 15 percent in 2011. The [direct] tax cuts announced in 2012 will boost VAT collections [further] in 2013 through increased consumption."

"The VAT collections in 2012 were higher than that of the previous year by FJD58.1m or 9.4 percent. Since Fiji’s independence, income and trade taxes do not constitute a large percentage of total tax revenue owing to policies towards investment promotion and trade liberalization respectively. The revenue mix has changed in favor of VAT and has remained the same way over the last 10 years,” he concluded.

TAGS: VAT rates | tax | value added tax (VAT) | accounting | Fiji | trade

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