NASSAU, BAHAMAS — Hours after Prime Minister Philip Davis announced a 50% reduction in the value-added tax (VAT), Economic Affairs Minister Michael Halkitis noted that this decision does not imply that the previous Free National Movement (FNM) government “had it right” regarding their VAT structure during their time in office.
Under the previous FNM administration, VAT was set at 12%, but breadbasket items among other select items, were zero-rated. VAT was initially introduced at a rate of 7.5% under the Christie-led administration a decade ago.
Following Davis’s announcement, some critics questioned if the new measures were better than the Minnis administration’s approach. Halkitis had previously argued that exemptions are not feasible to manage.
During a press briefing at the Prime Minister’s Office on Thursday, Halkitis explained that the government’s original idea when introducing VAT was to implement “a low rate across the board with few exceptions.” He emphasized that this approach was taken because the tax regime was new and because government agencies, such as the Department of Inland Revenue, were being established to regulate the newly implemented tax.
However, Halkitis pointed out that one year after the FNM took office, they increased the VAT rate to 12%, even though VAT was removed from 22 breadbasket items and certain fees, which he argued placed an additional burden on the shoulders of Bahamians.
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