The increase, scheduled to take effect on New Year's Day 2007, was especially unpopular among low-income earners, because it would have boosted prices of groceries and other staples.
Jona Senilagakali, the military-installed interim prime minister, said Qarase's plan would not go through.
"We want to be able to provide a decent living for everybody in Fiji"
military-installed interim prime minister
"[The tax increase] is one of the major complaints of the people down the street... and of course [adds to] the difficulty of maintaining a good standard of living at home,'' Senilagakali told the Legend radio network.
"We want to be able to provide a decent living for everybody in Fiji.''
The military also confirmed it would go ahead with a 2 per cent wage rise for Fiji's more than 20,000 public servants.
The move is intended to ease tensions with bureaucrats who have resisted orders from the military government, Rajeshwar Singh, the secretary of the Public Service Association, said.
"It is only hoped that the effect [of the coup] on the populace and the economy is kept to the minimum"
Emkay007, Auckland, New Zealand
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On Tuesday, Qarase offered to hold talks with the military government to arrest a situation he described as sliding towards "the worst kind of dictatorship" and restore democracy quickly.
"The army is intimidating and breeding fear. It's a sign of one of the worst kinds of dictatorship," he said.
He added that his main concern was to have democracy restored and indicated he would not insist on being reinstated to bring that about.
'Back to normal'
On Tuesday, Commodore Frank Bainimarama, the leader of last week's coup met senior civil servants and instructed them to operate "their respective ministries," Major Newmi Leweni, a military spokesman, said.
Bainimarama has sought to assure Fijians and potential tourists that his takeover need not disrupt the running of the country - despite his declaring a state of emergency with armed soldiers patrolling streets throughout the capital, Suva.
|Fiji's poor would have been hardest hit|
by the intended tax hike
He has encouraged businesses to return to normal life, saying on Monday the initial phase of what he called "this peaceful transition" was almost over.
He has promised to appoint an interim government that will eventually call elections to restore democracy.
In the meantime, he said he would not hesitate to use an iron fist to crush dissent, as he believed Qarase was willing to stir up violent opposition to the military.
He has banished Qarase from the capital and warned him that if he returns he will face arrest.
Qarase has urged people to peacefully resist the coup and said he plans to return to Suva.
Last week’s coup was Fiji’s fourth within 20 years and followed long-running tensions between Bainimarama and Qarase.