With reduction, zero-rating under VAT on a variety of items being eliminated

The Value-Added Tax (VAT) rate in The Bahamas will be decreased from 12 per cent to 10 per cent, no later than January 1 next year.

That’s the word from Prime Minister Philip Brave Davis, in signalling that an amendment to the VAT Act will be tabled in the Parliament within the next seven days.

In a communication in Parliament last week, Davis said the reduction in VAT will help Bahamians and the economy, explaining that the reduction is being managed in a way that is fiscally responsible.

“With the reduction in the VAT rate, we are eliminating the zero-rating under VAT on a variety of items. Price controls are in place to ensure breadbasket items will be fairly priced… . The VAT exemption for electricity bills and the special economic zones are untouched,” the prime minister said.

The tax was originally introduced at 7.5 per cent by the Christie administration — under which Davis served as deputy prime minister — in 2015. It was increased to the current 12 per cent by the Minnis administration in 2018.

In the supplemental budget, tabled last week, an $80.5 million increase in VAT revenue is forecasted for the current fiscal year. A VAT regime was originally introduced in the Bahamas in 2015.

VAT reduction will not adversely affect the country’s fiscal position

Davies advised that “the Ministry of Finance team has worked long hours, along with some of the brightest minds at the University of The Bahamas and the government and public policy institute, as well as with international consultants, to perform extensive modeling and financial analysis to ensure that the VAT reduction does not adversely affect our fiscal position”.

He made the point that “with the reduction in the VAT rate, we are eliminating the zero-rating under VAT on a variety of items. Price controls are in place to ensure breadbasket items will be fairly priced. The VAT exemption for electricity bills and the special economic zones are untouched”.