Davis: 10% VAT rate helps reduce impact of inflation
NASSAU, BAHAMAS — Prime Minister Philip Davis said yesterday that his administration is committed to not increasing taxes or fees “in the short-term”, noting that the government expects inflationary pressures to continue throughout this fiscal year.
Davis, while delivering his mid-year budget statement in Parliament yesterday, said the government is fully aware of the rise in inflation because of supply-chain issues post-COVID.
“We are also mindful of the inflationary pressure exerted by the invasion of Ukraine, and the sanctions since imposed,” Davis said.
“We have already implemented and will remain open to implementing a number of steps to minimize any negative impacts on Bahamians.
“I have charged our Consumer Protection Commission to do whatever it takes to protect our people from rapidly escalating prices wherever possible. We will closely monitor all sectors for price gouging.
“We will continue our push to enhance food security. Most importantly, we will continue to monitor and report on how all our tax policies are impacting the Bahamian people and the Bahamian economy.”
Davis added: “I have stated unequivocally that tax increases would be a last resort for this administration. As we now seek to restore the health of our public finances, our focus is clearly on being vigilant in restraining the growth of expenditure while re-allocating resources to those priority areas highlighted in our ‘Blueprint for Change’.
“At the same time, we are identifying and closing the very significant collections gaps that exist in some of our key revenue streams.
“I am confident that, through these actions, we will be successful in meeting the fiscal targets that are set out in our 2021 Fiscal Strategy Report.”
Increasing taxes essentially decreases the income of citizens, increases hardship and should only be used when absolutely necessary.
– Prime Minister Philip Brave Davis
Davis maintained that only increasing taxes as a means of resolving fiscal challenges is a lazy approach to governance.
“Increasing taxes essentially decreases the income of citizens, increases hardship and should only be used when absolutely necessary.”
The prime minister noted that increasing global inflationary pressure has translated into domestic inflation peaking at 4.12 percent in September 2021.
“In the short term, we expect inflationary pressures to continue throughout this fiscal year,“ he said.
“The government and its agencies are the largest providers of goods and services in this economy. This means that the government feels the impact of inflation immediately.“
According to Davis, the lowering of value-added tax (VAT) to 10 percent across the board is helping to reduce the impact of inflation on Bahamian households.
He acknowledged the effect of the reduction is harder to appreciate amid rising costs.
“Nonetheless, 95 percent of goods and services are less expensive than they would otherwise have been because of the reduction in the tax burden,” said Davis.
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