Government to forgo $30M in revenue as VAT on food items reduced to 5%

NASSAU, BAHAMAS – The government will forgo $30 million in revenue due to its decision to reduce the Value-Added Tax (VAT) rate on all food sold in stores from 10 percent to 5 percent, effective April 1st. 

During a weekly press briefing at the Office of the Prime Minister, Senator Michael Halkitis, the Minister of Economic Affairs, when asked how much revenue the government is likely to forgo, stated: “We estimate $30 million.”

Halkitis asserted that the decision does not imply that the Opposition was correct in advocating for the Davis administration to reverse course and remove VAT on breadbasket items, as was done under the former Minnis administration.

Halkitis explained: “When the FNM took VAT off breadbasket items and some other items, VAT was at 7.5 percent across the board. VAT is 10 years old this month. When we introduced VAT, our philosophy was to have a low rate across the board with a few exceptions. We wanted to keep it as simple as possible. We implemented VAT on January 1, 2015, and few months before we increased the minimum wage and raised public sector salaries by 10 percent. That was before the implementation of VAT at 7.5 percent across the board. The FNM came in in 2017, and in 2018, they took VAT off 22 breadbasket items and a few others, but they increased the VAT rate from 7.5 to 12 percent. It was a 60 percent increase.”

He added: “Before we came to office, we said we would reduce the VAT rate from 12 to 10 percent. Now, we’re coming back and saying that, because our economy has performed well, our revenue is improving, and the economy is growing—we are doing a fairly good job controlling expenditure—we have introduced the domestic minimum top-up tax, where we will get some revenue. And so now we’re saying we can give this concession, not just on 22 breadbasket items, but on all foods. We’re not saying they got it right.”

Halkitis further emphasized that the move is permanent and not a political ploy. “It has nothing to do with the election. It has to do with the fact that the price of food is on the minds of Bahamians. In the long term, we also need to make investments in agriculture and focus on strengthening the supply chain,” he said.