NASSAU, BAHAMAS — Prime Minister Philip Davis on Wednesday said his administration reduced Value Added Tax despite recommendations from the International Monetary Fund (IMF), insisting the decision was taken when it was fiscally prudent and necessary to ease pressure on Bahamians, as government and opposition MPs clashed over responsibility for VAT, food prices, and cost-of-living pressures.
Responding to opposition criticism, Davis defended the history of VAT and his government’s fiscal choices, acknowledging that the tax was introduced under the Progressive Liberal Party because of the country’s narrow tax base.
“It is agreed that VAT was introduced under the Progressive Liberal Party. It was a generally accepted fact that our tax base was very narrow, and too narrow to sustain our economy.”
He said successive administrations recognised that customs duties alone were insufficient to fund a growing population and rising demand for public services.
“We don’t have income tax. We were already at the border on Customs duty. And that was insufficient to take care of what we call a growing population, a growing demand for public services, like the hospitals and our educational system.”
Davis said the PLP deliberately introduced VAT at a lower rate than what was being discussed at the time.
“They too were thinking about coming in at what they were calling the regional average, which would have been anywhere around 15 to 17 percent. But no, we came in, recognised it’s a new tax, we came in at seven and a half percent.”
He noted that the subsequent Free National Movement (FNM) administration increased VAT to 12 percent.
“Immediately thereafter, it was reduced — you increased it to 12 percent, a whopping 60 percent of what we introduced.”
Davis said reducing VAT was a central promise of his government’s mandate.
“When we took office, we said we’re going to reduce VAT. We reduced VAT to 10 percent across the board.”
As debate intensified, Davis pushed back against opposition claims of mismanagement, arguing his administration acted responsibly and independently in its fiscal decisions — even when advised otherwise.
“The IMF advised us too. They were telling me that if I cut back it would destabilize the country. In fact, they were suggesting, as they were suggesting to you all, it should be raised to the regional average.
I told them no. Y’all want me to go that way — I’m going this way, down. And I did. I didn’t follow their advice.”
Opposition finance spokesman Kwasi Thompson countered that the government should have acted sooner to remove VAT from essential food items during the height of inflation.
“At the height of the inflation crisis, at the height of when Bahamians needed it the most, we said they should do the same… remove that off of all healthy food.”
Thompson said the delay undermined the government’s credibility.
“There is still no justification as to why they waited until 2025… This is what mismanagement looks like.”
Davis rejected that characterisation, arguing that responsible governance requires balancing compassion with fiscal stability.
He also defended his government’s international engagement, linking fiscal credibility to The Bahamas’ standing on the global stage.
“The Bahamas will not be in the position it is in on the global stage… if we didn’t have a presence on the world stage.”
Free National Movement (FNM) Deputy Leader and St Barnabas MP Shanendon Cartwright said rising electricity, food, and living costs continue to weigh heavily on Bahamians.
“Everything is going up under this government… the reality of the Bahamian people and their lives that they live every day is that it is not happening.”
Cartwright said the government has failed to acknowledge the daily strain on households.
“The Bahamian people are offended that the government continues to say, don’t worry about the pain that you’re feeling,” Cartwright said.
He maintained that VAT remains a PLP policy at its core.
“The VAT implementation was under the Progressive Liberal Party. VAT is their baby.”
