‘Consider political implications’

FIJI Labour Party (FLP) leader Mahendra Chaudhry has urged the Coalition Government to consider the political implications of recommendations made by the Fiscal Review Committee.

In response to the recommendations that were released, Mr Chaudhry said FLP rejected the recommendation by the committee for a flat rate which would remove current VAT exemption from basic food items, medicines, baby food and 21 other household items.

“The recommendation for a 14 per cent across the board, flat rate of VAT will be a severe blow to the poor — particularly families on low incomes who constitute almost 70 per cent of the population,” he claimed.

“It will drive more people into the poverty net.”

Mr Chaudhry also claimed most of the recommendations in report favoured the rich, and its impact would be felt across all sections of the economy, which in turn would fuel inflation and cost of living.

“It’s bad for businesses and the economy as a whole. It will add substantial costs to businesses, eroding their competitiveness and returns in both local and export markets.

“The $500 million in revenue the committee says the increase will generate is debatable, viewed against the additional government expenditure that it will entail. It is also highly likely that most of it will be spent in the unproductive sectors of the economy.

“The recommendation is counterproductive, as sharp increases in living costs will lead to renewed demands for salary and wage increases, creating an inflationary spiral.”

In addition, Mr Chaudhry said the Government itself would become its victim, having to incur millions in settling pending pay increase claims of public sector unions.

“It would not be in their best interests to jettison their campaign promises to bring down the cost of living, by adopting a short-sighted report likely to create more problems than it will solve.”