The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The former prime minister yesterday slammed the Davis administration’s decision to eliminate VAT-free breadbasket food items and medicine as “heartless and disgraceful”.

Dr Hubert Minnis, in his contribution to the supplemental Budget debate in the House of Assembly, launched the Opposition’s full-frontal assault on the proposed VAT reforms by asserting that lower income Bahamians will face an increased tax burden while products such as “caviar and champagne” enjoy a 2 percent cut.

Arguing that the end to tax breaks for foods such as milk, corn beer and grits will come at a price for many Bahamians, the ex-prime minister said the new administration’s return to a lower rate, broad-based model will have a “devastating effect on the inner city”.

Asserting that he had “done my research” with ‘Mom and Pop’ stores in such areas, Dr Minnis said reimposing VAT on breadbasket food items will add $48 per month to a low income family’s food bill. He based this on persons spending $20 per day, six days per week, on food, which adds up to $120 per week or $480 per month. A 10 percent VAT figure on the latter gave him his increase.

“VAT comes down across the board, but taxable items go up,” he said. “How will that affect the lives of Bahamians that are paying more for certain things? We call on the Government to come clean, and tell the whole story. To finance their promise [of a VAT cut] they are adding VAT to breadbasket items and medicine. I think this is heartless and disgraceful......

“Adding a 10 percent tax to these foods will have a devastating impact on the poor. Adding a 10 percent tax on medicines will have a devastating impact on the poor. These inconsiderate policy comes at a time when there are inflationary pressures throughout the world.”

Dr Minnis said he had been told by “major food chains”, who he did not name, that food-related living costs are projected to rise by 15 percent between “now and December”, and by “and additional 20 percent” between January and March. These estimates, though, are far in excess of what has been projected by the likes of Super Value.

“The VAT policy is an attack on the poor. It is a terrible lack of compassion and empathy. We in the Opposition stand fully against adding VAT to breadbasket items and medicines. It is shameful that the new administration would start its term in office by harming the poor,” the former prime minister continued.

However, what he did not mention is that virtually all VAT-related modelling, research and consultant studies have suggested that a low-rate, broad-based VAT is the best taxation solution for The Bahamas. And the same papers have all argued that the zero ratings and exemptions introduced by the Minnis administration complicated administration, reduced VAT’s efficiency and raised costs.

Dr Minnis also made no mention of the Government’s plans to increase social security assistance to relieve the burden of a 10 percent VAT on society’s most vulnerable. That, too, is regarded as a more efficient form of targeted assistance as opposed to providing tax breaks that benefit rich taxpayers who can afford to pay as well.

Still, not to be deterred, Dr Minnis argued: “The Government’s VAT policy means that VAT on caviar and champagne will decrease from 12 percent to 10 percent, but VAT on rice, tuna and grits is going up from zero, going from VAT free to 10 percent.

“This will have a devastating effect on the inner city. Most homes in the inner city don’t have refrigerators. I’ve done my research with Mom and Pop stores in the inner city. They informed me that the average individual will spend $20 per day because they don’t have a refrigerator and electricity. They do that for six days a week. They will now spend an additional $48 per month.

“They also point out that 60-70 percent of the purchases within Mom and Pop stores are breadbasket items. This will have a great impact on Mom and Pop stores. Their costs will have gone up and they will experience great stress in terms of the economy.”