NASSAU, BAHAMAS — Minister of Economic Affairs Senator Michael Halkitis says the government is confident it can absorb the projected $15 million revenue loss from the elimination of Value Added Tax (VAT) on unprepared food, citing economic growth and improved public finances.
“One item that has attracted the most commentary is the elimination of VAT on food in grocery stores,” Halkitis said, emphasizing that the reduction is part of a long-term plan, not a response to political timing. “Sitting in meetings with the Prime Minister, he had indicated as far as three years ago that he wanted to move towards the total elimination of VAT on food. Now, because of the improvement in our public finances and the growth in the economy, we feel confident that we can absorb any revenue loss associated with this reduction.”
He highlighted the projected revenue impact and the government’s strategy for offsetting it. “We estimate for the year about $15 million. Back in October, we were forecasting economic growth of about 1.8–1.9 percent. That has now been revised upward by the IMF to over 2 percent. With more economic activity, increased employment, and other revenue measures, we believe we can absorb this loss without significantly impacting the budget.”
Halkitis framed the VAT elimination within the government’s broader economic policy. “Back in March 2021, the Progressive Liberal Party unveiled its economic plan, Recover, Rebuild and Revolutionize, including a pledge to reduce VAT across the board from 12% to 10%. Effective January 1, 2022, we reduced VAT from 12 percent to 10 percent. By May 2022, we eliminated customs duties on healthy foods like soy milk, almond milk, spinach, sweet peppers, peas and beans, lettuce, cucumbers, cabbage, carrots, beets, cauliflower, and celery.”
He emphasized the practical benefits for consumers. “Very early in this administration, beginning three months after we came to office, we reduced VAT across the board. Six months later, we did a massive customs reduction on food.” Halkitis said the latest step—eliminating VAT on grocery food—is a continuation of that commitment.
The minister also highlighted complementary measures to support affordability. “We are expanding the national prescription drug plan. We expect well over 150,000 individuals enrolled to access medications duty-free. We are also reviewing dispensary fees charged by some pharmacies, which in many cases exceed the VAT. We are calling on the private sector to examine these fees and ensure cost savings are passed to consumers.”
Halkitis pointed to incentives for property ownership as another key feature of the Prime Minister’s announcement on Monday. “Beginning in 2026, owner-occupied duplexes and triplexes will see exemptions from real property taxes. Historically, if an individual built a duplex, resided in one unit, and rented the other, the rented portion was subject to property tax. We will now amend the legislation to make that other side exempt as well. This is a tremendous benefit for young Bahamians starting out in property ownership, particularly those who rely on rental income to help pay their mortgage.”
He also addressed first-time homebuyers. “The first-time home exemption ceiling will be raised from $500,000 to $600,000. No taxes will be applicable on conveyances and mortgages for homes valued at $600,000 or less. This represents a significant saving for first-time homebuyers and is part of our ongoing commitment to address the cost of home ownership.”
