Fiji is raising VAT from 12.5% to 15% from 1 January 2011. This was announced last Friday and gives businesses very little time to get ready for the increase. It will be interesting to see how they go and whether transitional measures similar to those introduced in New Zealand will be used to deal with insurance contracts and the like. Even with those concessions there have been grumbles from consumers in New Zealand annoyed at paying the new rate on goods and services (particularly utilities) they received before the rate change date.

Fiji’s businesses have more recent experience with VAT rate changes than New Zealand businesses with their last rate change being in 2003. So there’s every chance this won’t phase them too much. They also have some quite good transitional measures from when VAT was first introduced there in 1992 which they could call upon.

With 1 January falling on a Saturday perhaps things will be a little simpler but I feel for those who are now going to have to work extra hours over the holiday period to get everything ready. If consumers decide to go on a pre-rate rise spending spree there could be a xmas shopping bonanza for retailers but some may find the short lead in means they don’t have time to stock up in anticipation.

The refund scheme for tourists has also been extended so that the minimum qualifying expenditure limit applies to a tourist’s entire stay rather than as a daily limit.

Supplies of fish to Fiji fish processors will be exempt from VAT in future.

There are lots of other tax and duty changes in last week’s Fiji Budget with the other big news being the proposed introduction of a capital gains tax from 1 February 2011.

Iain