PM defends decision to add VAT on breadbasket items

Prime Minister and Minister of Finance Philip Brave Davis yesterday defended the government’s decision to reintroduce value-added tax (VAT) on breadbasket items once the tax is reduced from 12 percent to 10 percent.

The plan, which was revealed by the prime minister in a communication in Parliament on Wednesday, has been criticized by both the opposition and some members of the public who believe that it will place an additional burden on low-income households that are already struggling.

Asked to respond to the criticism, Davis said, “I invite them to go and look at the modeling that was done by independent advisors who are more familiar with tax matters. It’s up on our website. They’ll see how we arrived at it. It will be a tax-neutral matter.”

St. Barnabas MP Shanendon Cartwright said yesterday that the reinstatement of VAT on breadbasket items “would be a paralyzing burden on the back of the poor”. 

“To take away this much needed relief directly from Bahamian consumers would only increase hardships and force undue pressure on an already challenged social service safety net,” he said.

However, Minister of National Security Wayne Munroe, who also serves as Freetown MP, yesterday dismissed the opposition’s claims that the reintroduction of VAT to breadbasket items will negatively impact the poor.

“They tell you that you remove zero-rating on some things and it’s going to become more expensive,” Munroe said.

“And so this concept that the only thing low-income families consume are breadbasket items is insulting to low-income families. Low-income families do consume in large quantities, items that will now experience a two percent fall in VAT.

“The people who push that as somehow being punishing to – and let’s put it bluntly – poor people are insulting poor people. They are saying that the only thing you can afford are breadbasket items.”

The current breadbasket includes baby cereal, baby food, baby formula, bread, broths and soups, butter, canned fish, cheese, condensed milk, cooking oil, corned beef, evaporated milk, flour, fresh milk, grits, margarine, mayonnaise, mustard, powdered detergent, rice, soap and tomato paste.

VAT was introduced in 2015, under the Christie administration, at a rate of 7.5 percent. 

In 2018, the Minnis administration increased VAT to 12 percent.

It also eliminated VAT on breadbasket items, medical insurance, various medication, and prescription medication, tuition, electricity up to $300, water up to $50, among other things.

Minister of Economic Affairs Michael Halkitis said the government will also add VAT back to medical insurance and medicine. 

“We are going back to the model that is minimal exemptions, except for those things, and at a lower rate,” he said.

“When you take everything into the entire picture you will see a reduction in the cost of living.”

The prime minister has indicated that the VAT exemption for electricity bills and the special economic zones will remain untouched.

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