Paying the bills!

As our parliament sat to review the Budget for the coming year there was much to consider but interestingly there was little discussion on what could be the next big drama facing the Coalition Government.

First to the budget, while there were the usual list of gripes and grumbles from individual sectors of the economy in general it came with few surprises. That’s a big plus and a welcome sign that the Government is living up to its promise of stable predictable economic management.

There were concerns within the private sector that Minister of Finance, Professor Biman Prasad would go ahead with a signalled dividend tax, but he was talked out of it in pre-budget discussions. This government is interesting in that at cabinet level there are multiple levels of review. There is of course the main cabinet but the real decision making happens when the respective Deputy Prime Ministers meet. There is at DPM level a blend of experience with Professor Prasad providing an academic and business sceptic view balanced by Manoa Kamikamica with his considerable private sector experience. Understandably there are moments of friction, but it does appear to be working. As the Minister of Finance often remarks “no one wants to pay tax, but the bills need to be paid”.

That’s not to say that there weren’t a few grimaces on the faces of private sector reps when the budget was presented. The initial announcement of a considerable increase in the levy charged on artesian water left some of the smaller Fiji owned water producers scrambling. Interestingly this doesn’t affect Fiji Water who can claim Fiji tax back against their USA taxes so no complaint from them, but it did have the potential to hit local producers hard.

Fiji Water already pays an increased water resource tax of 19.5 cents per litre extracted from the source.

It was earlier announced in the budget address that the small water bottling companies will pay 5 cents per litre from the current 1 cent per litre that they are paying.

Fortunately, after much lobbying and internal discussion this was reversed.

In addition, the Tourism Industry isn’t particularly happy with the rise in departure taxes. Fiji is already notoriously expensive, and this could be the proverbial “straw” that turns tourists away. The Minister of Finance is justified in thinking that this is the time to exploit this boom sector BUT what needs to be remembered is that this industry turns slowly both up and down. As Professor Prasad pointed out in opposition, the industry was struggling leading up to COVID largely because of excessive taxation and we don’t want that to happen again.

Wage rises are always popular and there were plenty of goodies thrown around, but YB has to think that the Minister is being a bit naïve if he doesn’t think these will not be inflationary. Once again we saw on display the view that “fat cat” businesses should just absorb cost increases by shrinking profit margins. The problem with this is that while larger organisations may be able to wear a bit of pain there has to be at least a prospect of growth otherwise what is the point in investing. The Minister needs to ask why with an economy flush with cash, low interest rates LOCAL business confidence is not exactly booming! PS…… in case anyone has forgotten lower profit = lower tax revenue.

There are of course many reasons low levels of confidence, political uncertainty being one and we will get on to this, but there needs to be a general appreciation that it is tough out there for local business. However that said, most YB have talked to, aren’t too worried about increasing wage rates. What they are concerned about is that strangely pay rises aren’t generating increased productivity, in fact in many industries, particularly blue-collar ones, the opposite is happening.

It is an interesting phenomenon, which needs further study, but the trend is pretty clear. It would seem a combination of increased pay and booming remittances going straight into the pockets of ordinary Fijians is resulting in increased absenteeism and declining productivity. It would seem that there are many “workers” who have the view once they reach a certain weekly income earning extra just is not worth the effort.

One final comment on the Budget. After the big build up on the “war against drugs” pre budget, the $2 million allocation was a big let-down. Perhaps our “vuvale” are planning to top this up, which is appropriate since they are the reason we have the problem in the first place.

BUT all in all, a predictable budget which is what we need to start to build that confidence referred to earlier.

Now to the fun stuff. As expected a group of former FijiFirst parliamentarians have indicated that, while they remain independent, they will back the Prime Minister on critical issues including attempts to change the Constitution. It would seem we are headed for a welcome period of political stability. While some former FijiFirst members are persisting with challenging to deregistration and one has to wonder what’s the point, the bulk seem relieved to be able to enjoy some freedom! One of the features in the background is the fact that the Prime Minister is using the RFMF old boys’ connection to secure a core of support amongst the “independents”.

We do have to wonder though about the Prime Minister’s suggestion that he will use this new level of support to review the Constitution. Don’t get us wrong there is plenty to fix but we have to wonder whether it is politically wise for the PM to raise expectations in this area. Fine, you may have 75% of the parliament onside but you still need 75% of the registered voters to vote YES on any proposed changes. Read that last sentence carefully “75% of registered voters”. Based on the turnout at the last three elections this is impossible. It is a huge flaw but in the end it is the law, and we can’t just wish it away.

It would be better to look for ways to change various laws to counteract some of the “problems” rather than to waste energy and political capital on changing the Constitution itself.

Speaking of the “rule of law” our new Attorney General made an impressive start with his maiden parliamentary speech, all very inspiring. What wasn’t mentioned is the potential fallout from the Supreme Court decision on the Acting DPP, his reluctance to step down and the Judicial Services Commission taking a few days to enforce the ruling.

What is worrying members of the legal community is the possibility that, everything the Acting DPP has authorised since his appointment over a year ago, could be found to be null and void. Think about it, that is every prosecution, every decision not to prosecute, every appointment and termination for that matter. Yes that includes the Bainimarama prosecutions THE LOT!

While the potential chaos will sit on Government shoulders, should it unfold, responsibility for this mess sits with the Judicial Services Commission. It’s Chair, the Acting Chief Justice was warned, repeatedly and publicly, when the appointment was made that this was a likely outcome and yet persisted. The Government, who admittedly are obliged to respect the independence of the judiciary, also refrained from moving quicker on this matter presumably on the advice of the former Attorney General.

Some have suggested that retrospective legislation could be passed to fix this but even this might be a long shot. Time is ticking and guess who is going to pay the bill for fixing it!!??.

If there is a lesson from the Coalition Government’s first 18 months in office it must be PLEASE start with employing competent advisors. We know there are loyal supporters that need to be rewarded but tuck them away in a place where they can’t do too much damage or up their pension, it would be way cheaper!