By RACHNA LAL
The Fiji Revenue and Customs Authority (FRCA) has exceeded its target collections by $30.1 million for the six months ending June 30, 2013.
The total revenue collected as at June 2013 was $827 million against the forecast of $797.3 million.
Fiji Revenue and Customs Authority chief executive, Jitoko Tikolevu, has attributed the resounding performance to a number of factors, in particular the improved consumption level.
“The current revenue buoyancy is largely attributed to the multiplier effect of the expansionary fiscal policy to cut taxes in the 2011 and 2012 National Budgets,” he said.
“It is evident the solid current revenue collection is driven by consumption and we estimate this high revenue growth is going to prevail for a while.”
Benefits of tax cut
Mr Tikolevu said they were seeing a pattern of direct correlation of tax cuts and increased domestic VAT collection, which has been averaging at around 19 per cent growth over the six months.
“By cutting taxes, the Government has indirectly injected about $53.1 million in the economy through increased disposable income,” he said.
“FRCA has established that a large portion of disposable income has been spent leading to increased tax take.”
Mr Tikolevu said the authority has also seen improved Capital Gain Tax collection and this in some ways also reflect increased consumption spending in the real estate sector.
Revenue growth higher
When compared to the same period last year, revenue grew by 11.7 per cent, much higher than the projected 2.7 per cent gross domestic product growth for 2013.
The current revenue growth is also higher than that recovered over the last 10 years, which was 8.4 per cent.
This reflects a significant 4.3 per cent growth in tax revenue for a one per cent growth in the economy.
Mr Tikolevu said: “The performance against the forecast has been historic and FRCA has rarely seen revenue exceeding forecast in the order of over $30 million by the first half year.”
He added that trade tax revenue also increased owing to increased domestic aggregate demand.
Reforms and compliance
Whilst consumption has been identified as the key driver for current revenue growth, the authority believes the current revenue buoyancy can also be attributed to its reforms and improved compliance.
“FRCA’s target for compliance-driven revenue is $70 million and so far we have collected a large amount owing to major investigations which FRCA mounted at the beginning of the year,” Mr Tikolevu said.
“The authority feels in this era of tax cuts, voluntary compliance will drive revenue growth but we are also mindful of some taxpayers who may continue to evade,” he said.
“The tax arrears collection has improved as can be seen from the 20.7 per cent decline in arrears level from $127.5 million to $102 million.”
Caution
Although the current collection trend is positive, Mr Tikolevu also cautioned the current high consumption driven revenue would not always remain.
“We feel the current consumption level to decline overtime and accordingly we will expect that current revenue growth rate of 11.7 per cent to return to its normal growth rate which is around five to six per cent,” he said.
Mr Tikolevu highlighted that on average, there is 60 per cent collection required in the second half of the year.
“We have a huge challenge to collect 60 per cent of total forecasted revenue in the July-December period,” he said.
“Although I am optimistic of continued solid collections, I equally feel the authority has to ensure it continuously strategises its collection mechanism against many challenges that remain.”