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Editorial: Davis Cuts With One Hand, Increases With The Other

THERE has been a lot of talk, but yesterday we got to see Prime Minister Philip “Brave” Davis unveil his plan to reduce value added tax to ten percent.

The reduction isn’t coming right away – that is no surprise, but nor will it be so distant that it undermines Mr Davis’ election promise. It will be with us by no later than the turn of the year, promises Mr Davis. That is a positive move, as it stops the speculation over when the cut might come from becoming a drag on the economy.

How will we afford it? Well, it’s not going to be a VAT cut for everything – in fact, for some items it will be a rise. Breadbasket items will face an increase in VAT from their current zero rating. Mr Davis did not clarify which items would no longer be zero rated but the list currently includes medicine and items such as bread, butter, baby food and more.

So the VAT comes down across the board, but more everyday items become taxable, increasing the number of items being taxed.

Mr Davis made no bones about disagreeing with the way zero rating had been introduced by the former FNM administration, saying that in recent years “the country’s tax policy has moved far away from the original plan and intent. Indeed, through the actions of the previous administration, the VAT base has been eroded by the implementation of many classes and types of items being zero-rated.

“These changes were considered by experts to be ill-advised and poorly executed, who believe zero rating schemes are an ineffective and inefficient way to provide relief to the vulnerable in society.”

That’s easy to say now – but it might be harder to convince those who see their loaf of bread go up in price by ten percent.

The FNM, of course, have a different viewpoint, with former Minister of State for Finance Kwasi Thompson warning that the Davis administration will be hurting the most vulnerable people in society by reintroducing VAT on breadbasket items.

He also slammed the government for not having revealed this part of its tax plan earlier, saying they were delivering “half-truths”.

He said: “What they have said is they will decrease VAT, but what they have not said is that for all of those items that were previously zero-rated, it will actually increase by ten percent and so the cost of food will go up and the cost of all of those other items that were previously zero-rated will go up by ten percent. That was nowhere near included in any statement previously or today. What are all those items that were previously zero-rated that will now be ten percent? How will that affect the lives of Bahamians, that they will actually be paying more for certain things? We call upon the government to come clean, tell the whole story.”

Mr Thompson will seemingly not have to wait long for Mr Davis to come clean, if indeed the changes are to happen by the end of the year.

Mr Davis, for his part, has suggested there will be an increase in funds for families who need support.

After the effects of COVID-19, there remain a great many of those. Too many. We hope this sting in the tail of the VAT policy doesn’t pull more into the poverty suffered by many this past year and a half – and longer.

We now await the tabling of legislation to see the full picture. We will not be the only ones watching eagerly to learn more, we are sure.

Comments

realitycheck242 2 months, 4 weeks ago

Politricks ....thats what it is.......Wait until they bring on Income Tax.

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FrustratedBusinessman 2 months, 4 weeks ago

Yes, an income tax will be brought in to "reduce the national debt". Family Island Bahamians will have to pay RPT to "reduce the national debt". Business owners will have to pay business license fees + a corporate rate to "reduce the national debt". Eventually we will have an unrealized capital gains tax brought in ala the US to "reduce the national debt" as well.

Most Bahamians just haven't figured out that "reduce the national debt" is a euphemism for "fill up the gravy train so that we can get a scoop".

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sheeprunner12 2 months, 4 weeks ago

"Reduce the national debt" will become the byword for real. The PLP hoodwinked us with VAT, the FNM increased it and now the PLP has the new normal VAT. ...... More tricks to come as the $$$ screws tighten.

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stillwaters 2 months, 4 weeks ago

All of his people are in their posts with attractive salaries, board members are straight, so now it's time to squeeze the people who have to pay for all of that.... the small man with small money.

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Honestman 2 months, 4 weeks ago

The PLP and FNM between them have taken us to the economic precipice. With National debt now in the region of 100% of GDP, the PLP is by its very nature, incapable of taking the harsh economic measures needed to "right the ship". So, as many predict, it will be left to the IMF to bail us out and thereafter force on government the measures that are necessary but politically unpalatable. It is coming folks. I give it 12 - 24 months.

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birdiestrachan 2 months, 4 weeks ago

Ten per cent across the board is better than VAT-free breadbasket items. because VAT is on items that cost more phones bills. power doctor visits surgery. and the list goes on.

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Proguing 2 months, 4 weeks ago

No it’s not.

Example below:

$100 in groceries will now cost $110

$112 doctor bill will now cost $110.

If you add the 10% food inflation that Supervalue is warning about, that will really be $120 groceries bill for the $100 you paid in 2020.

And it's not only the breadbasket items that were exempt, there is also medication, rent, and insurance that you conveniently left out.

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birdiestrachan 2 months, 4 weeks ago

Shandon Cartwright had no problems with VAT when the FNM increased VAT 60%

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Proguing 2 months, 4 weeks ago

PLP introduced VAT.

FNM excluded items such as breadbasket and medicine to alleviate the suffering of the poor.

Having selective memory again?

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birdiestrachan 2 months, 4 weeks ago

I am going to try to help you Rich folks buy breadbasket items also. No VAT on breadbasket items are great if that is all you have to buy. But if you strive to buy a lot or a house or a car or even tyers for a car. the phone bills Doc bills the difference between 12% and 10% matters big time.

TRUTH BE TOLD AND GOD BE THANKED. man can not live on bread alone Breadbasket items are small things small ticket items.

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hrysippus 2 months, 3 weeks ago

Adding 10% value added tax onto breadbasket items will result in a higher than 10% price increase to the grocery shopper. The increase will be somewhat compounded; 20% vat on the original cost and the shipping costs, then the wholesaler must pay an additional 10% on his selling cost while claiming back the Valued Added Tax paid on the import, then the retail grocery store must ad 10% to the selling price while claiming back the 10% paid to the purchaser. The bottom line is that the cost will rise by more than 10%.

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