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World Bank Report recommends increased single rate of VAT, changes to personal income and corporate tax, reduce tax incentives and expand customs and excise tax regimes

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The World Bank technical analysis is recommending the broad application of an increased, single rate of VAT for Fiji in the latest Public Expenditure Review Report.

It says returning to the pre-2016 VAT rate of 15 percent, already partially introduced through the 2022 Revised Budget, appears to be suitable.

The World Bank says this could be implemented in a phased manner (as appropriate) and should have no or strictly limited exceptions, in line with international best practice.

It says the VAT rate change should be complemented with reforms to the registration threshold, voluntary registration, and non-resident suppliers.

The report says the fiscal incidence analysis shows that using the VAT regime to provide relief to poorer households through zero-rating of essential items is costly, and the Public Expenditure Review recommends replacing this with an increase in direct transfers to poor households, for which targeting needs to improve.

It gives scenarios that can be implemented for revenue reform for consolidation.

These include reforming the VAT regime by expanding the VAT rate rise to other goods and services and reversing the zero-rating of VAT on essential items (while compensating low income households for negative impacts); updating the corporate income tax regime and reducing tax incentives; expanding the customs and excise tax regimes; simplifying personal income tax rates and broadening their base; and reversing departure tax reductions as tourism rebounds.

It says a supplementary reform to strengthen domestic resource mobilization should focus on improving revenue administration performance.

The four expenditure reforms recommended are controlling the public wage bill to prevent upward pressures from materializing and achieving a gradual reversal of spending back to 2016 levels; prudently managing capital outlays, allowing for a slight increase to 9 percent of GDP, and making public investment more efficient and effective; transitioning out of sugar sector support; and phasing out pandemic support and restraining other current spending, broadly in line with the forward estimates of the 2022 Revised Budget and 2023 Budget.

The World Bank report says the supplementary expenditure side measures the Government should implement are improving targeting of social protection schemes, and reforming the tertiary education scholarship and loan schemes.

The four complementary public financial management reform areas are continuing prudent borrowing and good debt management practices to reduce costs and risks of public debt; closely monitoring and reducing fiscal risks stemming from contingent liabilities that have been increasing in recent years; improving data collection and information systems to provide an evidence base for fiscal policy, reform design, and impact monitoring; and strengthening strategic fiscal planning and budgeting to guide consolidation efforts over the medium-term in a transparent and accountable manner.

These reforms need to be complemented by business environment reform, fostering private sector development to support growth.

Scenario 1

This scenario comprises reforms to simplify the personal income tax rate structure and lower the tax free threshold, raise the fringe benefit tax, and introduce a dividend withholding tax. It would also eliminate reduced corporate income tax rates and export incentives, extend the increased VAT rate to other goods and services, raise the excise tax on alcohol to previous levels, and implement a modest increase in the departure tax. A removal of the zero-rating of VAT on essential items is combined with an increase in poverty benefit scheme spending to offset negative impacts on lower-income households.

Expenditure measures will support fiscal consolidation by focusing on the wage bill, tertiary spending and sugar subsidies.

These revenue measures are supplemented by slightly lower nominal wage bill growth in 2024, a reduction in tertiary education scholarship and loan scheme spending, and a modest cut in other current spending. A gradual reduction in sugar sector subsidies is partially offset by redirected agriculture support spending to provide an enabling environment (including basic agricultural research and development). No cuts to baseline capital spending are made in order to limit negative long-term impacts on growth and maintain a minimum spending level to fund investments in public service delivery and climate and disaster resilience.

The report says the moderate consolidation scenario puts Fiji on a pathway to reducing its debt to GDP ratio, which would fall to around 65 percent by 2032. This scenario would result in the government meeting the majority of the objectives. However, this scenario would still leave the debt-to-GDP ratio well above its pre-crisis level of around 50 percent, which was considered high prior to the pandemic given Fiji’s substantial exposure to shocks.

Scenario 2

The ambitious fiscal consolidation scenario assumes the implementation of further, more aggressive revenue measures, and a more comprehensive expenditure reform package.

It considers selected additional revenue reforms over 2023 to 2027: the reversal of the fuel duty reduction (implemented as part of the 2022 Revised Budget); the introduction of an excise tax on sugar(y) products; a further rise in the departure tax to pre-crisis levels; and the implementation of a revenue administration improvement program, partially offset by its costs.

Expenditure-side reforms include an extension of the lower nominal wage bill growth until 2025; the full phaseout of sugar sector subsidies, partially offset by agriculture support spending; a further modest reduction in tertiary education support; and additional modest cuts to other current spending.

Capital spending increases to 9 percent of GDP are maintained in this reform scenario, which is considered the minimum necessary to fund investments in public service delivery and resilience. The report says the only path for Fiji to return to pre-crisis debt levels is through the ambitious fiscal consolidation pathway.

The World Bank says the results show that the Government needs to implement substantive revenue and selected, well-targeted expenditure reforms to chart a downward trajectory for public debt.

In both Scenarios 1 and 2, interest as a share of GDP returns to pre-COVID-19 levels (at varying speeds), which is essential to avoid the crowding out of more productive spending.

The World Bank says to achieve their overarching debt targets, the authorities in Fiji need to implement reforms at least as ambitious as those set out in Scenario 1. However, Scenario 1 is close to a zero primary balance scenario where growth would be the only debt reduction driver.

The other fiscal targets are only consistently achievable with more ambitious reforms, in line with those included under Scenario 2.

It says only Scenario 2 reaches pre-pandemic debt levels within a decade, which are still considered high for a country exposed to frequent shocks.

The report says the ambitious consolidation path illustrated under Scenario 2 is particularly worth considering by the authorities, as the high disaster risk and exposure to climate change impacts as well as the uncertain global outlook warrant the rapid rebuilding of fiscal buffers and the freeing up of fiscal space for growth-and resilience-enhancing investments.

 

SOURCE FIJI VILLAGE

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Fiji ‘worse off today’, former PM warns, as Rabuka’s constitution overhaul faces backlash

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Mahendra Chaudhry, Fiji’s first and only prime minister of Indian descent, has warned that the island nation is “worse off today than we were at independence” and that its political leadership must focus on solving social and economic issues rather than “making multiple constitutions”.

Chaudhry made the comments over the weekend while making a submission to a special parliamentary committee – led by Prime Minister Sitiveni Rabuka – on the country’s constitutional reform process in Vanua Levu, Fiji’s second main island.

“Are we doing enough to alleviate the problems that we face as a nation that our people face, problems of poverty, hunger, unemployment, poor health services, education problems, crumbling infrastructure, the invasion by drug traffickers, HIV, NCDs (non-communicable diseases)?

“Is the economy delivering to the people? Are we giving sufficient attention to the economic problems that the nation faces? Because you can do nothing on the back of a failing economy.

“These are areas where our attention should be focused,” the former prime minister, whose government was held hostage at gunpoint for 56 days during the 2000 ethno-nationalist coup, said.

Sitiveni Rabuka and Mahnedra Chaudhry embrace at the reconciliation church service on 14 May 2023.
Mahendra Chaudhry, right, embraces Sitiveni Rabuka during a reconciliation church service on 14 May 2023.

Fiji Government

Rabuka’s coalition has made it its mission to replace the 2013 Constitution – widely criticised as being imposed by the previous Bainimarama administration – ahead of a looming election.

His government is currently conducting nationwide public consultations on its Constitution (Amendment) Bill 2026, which passed its second reading earlier this month and is set to be brought back to parliament for its third reading next week.

If the bill passes its third reading, Fiji is set to hold its first national referendum in December, where the people will vote on whether they want Rabuka’s constitution. In its current form, the bill – presented to parliament in September – has been criticised as a downgrade from what the Constitution Review Commission had proposed.

Fijian Prime Minister Sitiveni Rabuka
Prime Minister Sitiveni Rabuka

RNZ Pacific / Fiji Parliament

Rabuka and his inner circle are backing the removal of the current constitution despite widespread opposition from local community leaders, non-governmental organisations as well as his own coalition partners who say that the process is being “rushed”.

Rabuka, 78, said he had a responsibility that he would review and amend the 2013 Constitution and “that’s what we’re going for”.

“You voted for us – some in government and some in opposition – so we have the collective vote of the people of Fiji,” he said at one of the public consulations last week.

“And you have entrusted us of doing the amendment in accordance with the rules of the country.”

The move has also given rise to online conspiracies and misinformation that Rabuka is deliberately trying to delay the election, forcing him to provide assurances that the general election will proceed as planned.

More than 723,000 eligible voters are expected to head to the polls no later than 6 February 2027.

Rabuka has so far kept the date of the general election close to his chest, stating previously that the election date will be announced after the constitutional reform process was completed.

“This is the fifth constitution that we will be looking at. Have the four previous constitutions served our purpose? Has it helped the people?” Chaudhry asked.

“Why do we rush this process of a new constitution? It can wait,” he said.

Chaudhry said Fiji could have an election under the 2013 Constitution and the incoming government could deal with the constitutional reform process.

“We have got to listen to the people. In this process, what I have noticed is that everybody has complained,” he said.

“If anything that has come through very clearly and loud in this consultation meeting, it is the people saying, ‘No, look, give us more time’.”

While the government’s constitution bill maintains the common national identity ‘Fijian’ for all its citizens, it proposes a new parliamentary system, brings back an unelected senate, changes the current electoral system, and provides “excessive concentration of constitutional power in the Executive”, according to Fiji’s Centre for Democracy and Dialogue.

It also includes Christianity as a founding value.

Chaudhry said the country should be looking at the proposed constitution that was presented by the Constitution Review Commission and not the government’s version of the document.

“Having had a look at the constitution presented as Bill 32 of 2026, I find it divisive, undemocratic, and discriminatory in many of its provisions,” he said.

“I have no problems with Christian values. I think they are good values, but I believe that religion and state must be kept apart because this is one aspect which can cause serious division [in a] multiracial country like Fiji between communities.

“I am a Hindu. My wife is a Christian. We have no problems. She practices her religion. I do mine. So where is the problem? Why do we have to put in something which is causing controversy? Is it necessary? It is not.”

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PM confirms the next general elections will be held under the current electoral system and by Feb 6th 2027

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With some creating confusion by saying that the general elections will not be held during the required legal timeline under the 2013 Constitution, and uncertainties surrounding drastic changes to the electoral system that could affect the Fijian Elections Office’s preparations with only about 8 weeks to go for the Writ of Elections to be issued, Prime Minister, Sitiveni Rabuka has today made it clear that logically, the next general elections will be held under the current electoral system.

Rabuka made this clear in an exclusive interview when fijivillage News asked him on whether he can confirm to the people if the next general elections which has to be held by February 6th 2027, will be held under the current electoral system.

We also asked Rabuka whether any electoral changes, including those in the Constitution Amendment Bill on the drawing up of electoral boundaries if a multi constituency electoral system is approved, will be used in the elections after the 2027 elections as we need the boundaries drawn up, and population figures based on the census, which is scheduled to be held next year.

In his response, the Prime Minister says the constituency boundaries have to be drawn up and the census will take place next year.

Rabuka says the census data will provide the essential information for the Electoral Commission to do their work in time for any elections eventually the next government will face.

In a recent interview, Supervisor of Elections, Ana Mataiciwa had said that the Fijian Elections Office is ready to deliver the general elections under the current system based on the legal timeline where the last day for the Writ of Elections to be issued by the President on the advice of the Prime Minister is December 24th this year and the last date for the general elections is February 6th 2027.

She had said it would be impossible to deliver the general elections operationally within this timeframe if drastic changes are made to the electoral system including a multi constituency system.

The transitional provision of the Constitution Amendment Bill states that on the commencement of the law, the current parliament continues until it is dissolved or ends its term in accordance with section 58 of the 2013 Constitution.

This means the next general elections will be held under the legal timetable specified in the 2013 Constitution – the last day for the Writ of Elections to be issued is 24th December this year and the last day for the general elections is February 6th next year.

It is also stated that the 2026 Constitution Amendment Bill, if passed, will come into force on 31st March 2028.

However the President may, by Proclamation published in the Gazette, fix a date earlier than 31st March 2028.

Despite the commencement, section 58 of the 2013 Constitution continues to apply to the current parliament, and the maximum term of the current parliament remains 4 years from the date of the first meeting of the first Parliament.

The Constitution Amendment Bill also proposes the retention of a 55 member Parliament however a system is proposed where 33 constituency members or such number as Parliament may by written law

prescribe, which includes 5 maritime constituencies chosen directly by the registered voters of those constituencies in a first-past-the-post election; and 22 party list members or such number as Parliament may by written law prescribe, allocated to political parties in proportion to the total number of votes for the candidates of that party in the constituency seats.

Parliament or the House of Representatives is to be composed in a manner that reflects, as closely as practicable, the proportion of votes cast for political parties.

A political party is entitled to proportional representation if it secures not less than

5 percent of the party vote.

Constituency seats won are deducted from each party’s proportional entitlement, with the balance filled from party lists.

The Party list seats must be allocated in accordance with a written law prescribing an appropriate mathematical rounding method, which rounds fractions to whole numbers to determine seat allocations.

Candidates unaffiliated with a political party may contest constituency seats, and if elected, serve as independent members without affecting proportional allocation.

A candidate of a party can stand for election in a constituency seat and be included in the party’s list for a party list seat.

The Bill says Parliament may provide, by written law, for temporary special measures relating to the way in which party lists must be constituted, for example measures to ensure, as far as possible, equal numbers of male and female candidates; or measures to otherwise facilitate diverse representation on party lists.

The maritime constituencies are Rotuma, Yasawa, Kadavu, Lomaiviti and Lau.

A candidate for election to the House of Representatives must be either nominated by a registered political party or nominated as an independent candidate in accordance with the laws governing elections.

A person may be a candidate for election to the House of Representatives only if the person is a citizen of Fiji; is qualified to be registered as a voter and is registered on the Register of

Voters; is ordinarily resident in Fiji for at least 2 years immediately before being nominated; is not an undischarged bankrupt; is not a member of the Electoral Commission and has not been a member of that Commission at any time during the 4 years immediately before being nominated; is not subject to a sentence of imprisonment when nominated; has not, at any time during the 8 years immediately before being nominated, been convicted of an offence under any law for which the maximum penalty is a term of imprisonment of 12 months or more; and has not, in the 5 years immediately before being nominated, been found guilty of any offence under a law relating to elections, registration of political parties or registration of voters.

The total number of candidates that a political party may nominate for any general election must not be more than the total number of seats in the House of Representatives, and the total number of candidates that a political party may nominate for any by-election must not be more than the total number of vacant seats in the House of Representatives for which the by-election is held.

If a seat in the House of Representatives becomes vacant, the vacancy must be filled in the case of a constituency seat, by a by-election; and in the case of a party list seat, by the next candidate on the party list; or if there is no next candidate on the party list, by a by-election.

The Bill also proposes the House of Representatives continues for 5 years from the date of its first meeting after a general election of the members of the House of Representatives, unless sooner dissolved in accordance with the Constitution.

 

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‘Respect the people’: Fiji coalition clash over Rabuka’s fast-tracked constitutional referendum

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Cracks are starting to show within Sitiveni Rabuka’s coalition government ahead of a looming general election and a potential national referendum, as the country prepares to mark its 56th anniversary on Saturday.

This follows the National Federation Party (NFP) and the Social Democratic Liberal Party (Sodelpa), both the minor partners that helped Rabuka return to power, publicly calling out the prime minister for fast-tracking a constitutional reform process.

NFP leader Biman Prasad, who said earlier that his party fully supported the joint parliamentary process to review Fiji’s proposed Constitution (Amendment) Bill to change the 2013 Constitution, shifted his stance after Rabuka pre-emptively announced a referendum date.

“We (NFP) have said all along very clearly that the new constitution, once and if it is passed and approved, the implementation of that constitution should not be rushed,” Prasad, who was one of three Fiji deputy prime ministers, said on Monday.

However, in a statement on Tuesday, he declared that the NFP “outrightly rejects” Rabuka’s attempt to fast-track the process, comparing the approach to the previous Bainimarama administration’s unilateral implementation of the 2013 Constitution.

He said Rabuka’s announcement was inconsistent with Section 160(3) of the 2013 Constitution on holding a referendum.

“This is not how to formulate a genuine, meaningful, and fair constitution for all our people,” Prasad said.

“It is now clear that [Rabuka] is pre-empting the outcome even before the bipartisan special parliamentary committee, which was unanimously agreed to by parliament last week, has met and started scrutiny and consultation with the people on the draft constitution bill.”

“The prime minister must reconsider his position and respect the people.”

Biman Prasad, left, and Sitiveni Rabuka in December 2022.
Biman Prasad, left, and Sitiveni Rabuka in December 2022.

RNZ Pacific / Kelvin Anthony

The election and referendum timelines

Fiji is expected to hold elections by 6 February at the latest as the Rabuka administration’s term legally comes to an end on 24 December. Rabuka has delayed announcing an election date, previously telling RNZ Pacific that it depends on the constitutional reform process.

The prime minister prematurely announced the referendum date for 9 December after the government’s Constitution (Amendment) Bill passed its second reading last Friday. He also announced that he would write to the Electoral Commission to suspend all election-related campaigning until after the referendum.

During the crucial second reading, the government secured 38 votes (out of 53) in favour of the bill to meet the required two-thirds majority of 36 MPs needed to progress the legislation to the next stage.

The Electoral Commission has stated that it would “give the matter serious consideration” before making any decision.

“We will deliberate and consider the extent of the discretion provided under section 15(2) of the National Referendum Act 2026 that provides guidance when the discretion is activated, and whether it should be exercised, including the reasons for and against doing so and the potential impacts of either approach,” it said in a statement.

Demand for ‘constitutional order’

Sodelpa is calling on Rabuka to “immediately respect constitutional boundaries” regarding the national referendum process.

“The rule of law and constitutional order in Fiji cannot be subordinated to executive convenience or political scheduling,” Sodelpa leader Aseri Radrodro, who is also Rabuka’s education minister, said in a statement.

The party said no one was above the law and that all parliamentarians must make decisions that prioritised the Fijian people.

Some of Fiji’s leading civil society organisations have warned that the Electoral Commission cannot lawfully suspend general election campaigning at this stage.

Fiji’s opposition condemned the announcement, saying that Rabuka was “putting the cart before the horse”.

Justice Minister Siromi Turaga has defended the process, stating on Monday that the government would systematically inform the Fijian people about the bill.

But Prasad said parliamentarians cannot do a deal on the constitution behind closed doors.

He said the government must first go back to the people to ask them what they think about the constitution bill.

“That will take time,” he said.

“All our citizens must understand what the draft constitution says and what it means for them. We could never do this in 30 days.

“If this process must be finished after the next election, so be it.”

Prasad said announcing a referendum was not Rabuka’s decision, as under the law, only the president can do that.

“And only after the bill has been passed by parliament. How does the Prime Minister then expect the people to vote for a constitution they have barely seen?”

“This announcement [of a] referendum and the process is wrong. The whole point of a new constitution is to bring our people together. It is not to divide us further.”

More than 723,000 eligible Fijian voters have registered to cast their vote at the general election.

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