NASSAU, BAHAMAS — While accounting for the year-over-year change in inflation, the government saw a 23.4 percent increase in Value-Added Tax (VAT) revenue in the first six months following the decision to reduce the tax rate from 12 to 10 percent.
The Ministry of Finance in its 12-month report on budgetary performance for the fiscal year 2021/2022 noted that in January of this year, the Government began the launch of its expansionary fiscal policy by reducing the nominal rate of VAT from 12 percent to 10 and eliminating many zero rating categories.
“This new policy was implemented with effect 1 January 2022,” the Ministry of Finance reported.
“Despite the reduction in the nominal VAT rate, revenue outturn from VAT receipts grew period-over-period by 30.3 percent to $591.3 million for the first six months of 2022. The same total increased over the first half of 2021 by $93.5 million (26 percent) when compared to the 2020 figure of $360.2 million. However, over the period inflationary pressures intensified to the highest recorded in The Bahamas in recent years.”
It further noted that accounting for the 6.2 percentage change in inflation year-over-year, VAT receipts grew 23.4 percent over the six months following the policy change. The ministry said 2022 growth adjusted for inflation represents the highest in recent years compared to the 29.1 percent decline in 2020, and the 23.0 percent increase in 2021.
The government’s decision to implement a 10 percent value-added tax (VAT) on previously zero-rated items and services was widely criticized, although the Davis administration maintained that VAT exemptions negatively impacted the tax collection effort.
In 2018, the former administration made several items and services VAT-free including breadbasket items, prescriptions, and some over-the-counter medication.
Loading ...
