By NEIL HARTNELL
Tribune Business Editor
The Opposition’s finance spokesman yesterday voiced concern that Bahamian merchants and families could miss out on a significant inflation offset if no Back-to-School ‘VAT-free holiday’ is held this year.
Kwasi Thompson told Tribune Business the former Minnis administration saw this as “an important incentive” to encourage Bahamians to purchase school supplies, books and clothing locally, thereby keeping money circulating in the country’s economy and boosting revenues for businesses.
The Davis administration, though, has been silent on whether this so-called ‘VAT holiday’ - which removed the then-12 percent levy via the introduction of ‘zero rated’ treatment on school supplies for a limited time period - will be reintroduced this year. It did not reinstate the ‘hurricane supplies’ VAT relief brought in for the first time last year, and time is fast running out to do so with the back-to-school variety.
“We have not heard anything from the Government with respect to the back-to-school VAT holiday,” Mr Thompson, the east Grand Bahama MP, told this newspaper. “The FNM also implemented a VAT holiday for hurricane season. This is a very important holiday for persons shopping for back-to-school.
“It’s important for those persons whose businesses are back-to-school. It was an important incentive to purchase locally as well. We are very, very concerned that we have not heard anything from the Government with respect to the VAT ‘holiday’.”
Mr Thompson said the two previous back-to-school ‘VAT holidays’ “generated millions of dollars in aggregate savings to thousands of Bahamian households since inception”, although he did not quantify this and this newspaper has seen no previous economic impact assessment on the initiative’s benefits.
“We call on the Government to provide the public immediately with the timelines for these critical initiatives, which are even more important now given the impact of recent significant price inflation,” he added. “We demand that the Government advise Bahamians when they can expect to see the VAT-free ‘holidays’.”
Meanwhile, Hubert Edwards, principal with Next Level Solutions, a Bahamas-based risk management consultancy, warned that the International Monetary Fund’s (IMF) decision to slash its 2022 global economic growth forecast by a further 40 basis points to 3.2 percent “brings us closer to the possibility” of a worldwide economic recession.
He argued that the “two most significant drivers” that The Bahamas must watch are China’s “under-performance” impacting the global supply chain as well as continued higher energy and food prices as a result of Russia’s continuing invasion of Ukraine.
Mr Edwards said continued interest rate increases on developed countries, as they seek to combat inflation, could raise The Bahamas’ own foreign currency debt servicing costs as well as undermine this nation’s post-COVID recovery and fiscal consolidation. Bahamian consumers, too, will face reduced purchasing power, rising living costs and reduced living standards.
“Lower growth earlier this year, reduced household purchasing power and tighter monetary policy drove a downward revision of 1.4 percentage points in the US. In China, further lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1 percentage points, with major global spillovers,” the IMF said of its trimmed growth forecasts.
“And in Europe, significant downgrades reflect spillovers from the war in Ukraine and tighter monetary policy. Global inflation has been revised up due to food and energy prices as well as lingering supply-demand imbalances, and it is anticipated to reach 6.6 percent in advanced economies and 9.5 percent in emerging market and developing economies this year - upward revisions of 0.9 and 0.8 percentage points, respectively. In 2023, disinflationary monetary policy is expected to bite, with global output growing by just 2.9 percent.”