Opposition Leader Hon. Matthew Wale has questioned the Ministry of Finance and Treasury (MoFT) on whether sufficient consideration has been given to the potential impact of the proposed Value Added Tax (VAT) on the cost of living.
Hon. Wale raised the issue when officials from the MoFT appeared before the Bills and Legislation Committee (BLC) during its hearing on the Value Added Tax Bill 2025 today.
The Opposition Leader emphasized that understanding the cost-of-living implications of the proposed legislation is critical, as this is where households and family budgets most directly feel the impact of the tax system.
MoFT officials responded that such analysis remains uncertain but indicated it may have been undertaken previously through work supported by international partners such as the International Monetary Fund (IMF) or the World Bank.
They explained that while a high-level regulatory impact assessment has been conducted, a detailed micro-level assessment has not yet been completed due to limitations in the availability of detailed data.
Hon. Wale said more comprehensive data should be prepared and presented to the Committee.
To assist the BLC in its deliberations, Hon. Wale suggested that the Economic Reform Unit (ERU) prepare a detailed presentation for the Committee.
He said the presentation should include several key areas.
Firstly, Hon wale said the presentation should clearly explain the economic modelling used by the ministry, including how the proposed VAT would affect current tax legislation and existing revenue streams.
“This should include an explanation of which taxes would be replaced or repealed and how the new VAT system would generate revenue in comparison,” Hon. Wale said.
Secondly, he said the presentation should provide a more detailed analysis of tax compliance.
The Opposition Leader said this should identify where compliance is currently weakest and explain the underlying reasons.
“Such analysis would help the Committee better understand the challenges within the current system and the basis for expectations that VAT could improve compliance and revenue performance,” he said.
Thirdly, Hon. Wale said the presentation should outline the broader economic impacts of VAT, including effects on economic activity, trade, production and services, as well as the expected impact on the cost of living.
The Opposition Leader also noted that the Ministry had excluded goods and services that currently attract excise duties from the VAT framework.
He recommended that this policy decision should also be addressed in the presentation, including the rationale for the exclusion and whether it reflects deliberate policy choices or administrative challenges.
Hon. Wale and BLC Chairman Hon. John Maneniaru has requested MoFT officials to return with a more comprehensive and analytical presentation addressing the Committee’s requests before appearing again before the BLC.
