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SUVA, Fiji Islands (August 24, 1999 – Fiji Village News)---Prime Minister Mahendra Chaudhry announced in Parliament today that the VAT (value added tax) on six basic food items -- flour, rice, canned fish, edible oil, powdered milk and tea -- will be scrapped.

Chaudhry said the reduction in prices arising from VAT exemptions will come into effect immediately after Parliament approves the necessary amendment legislation to enable the exemptions.

The government will introduce the bill at the next session of Parliament.

Meanwhile, fiscal duty on edible oils, powdered milk and tea is being reduced from 27 percent to 20 percent and fiscal duty on wheat or muesli flour and sharps (unrefined flour) will be slashed from 27 to 15 percent. The reductions will become effective beginning Thursday, August 26, 1999 at midnight.

Chaudhry has instructed the Price and Income Board to ensure that the full benefits of the reduction of duties and the scrapping of the VAT are passed on to consumers.

The government will lose $20 to $25 million in revenue after the Value Added Tax is scrapped from basic food items.

The state will also lose out about $1.34 million in revenue due to the reduction of fiscal duties.

Deputy Opposition Leader David Pickering has expressed some concern as to where the government will recover the revenue lost.

"My party and the team of the Opposition will be delighted with the reduction on VAT, but we are more interested is where the $20 million in shortfall will be found," Pickering said.

The Fiji Retailers Association is expecting some difficulty in adjusting to the planned removal of VAT from the six basic food items.

However, President Himmat Lodhia said the benefits to the consumer outweighed the increased paperwork retailers would have to go through. "That's an issue, but I guess if the consumer is going to benefit we have to sacrifice a little bit, and we hope the officers at the VAT will get educated further and be a little more flexible," Lodhia said.

For additional reports from Fiji Village News, go to PACIFIC ISLANDS REPORT News/Information Links: Fiji Village News).

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