The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister last night said talks with major food retailers had found “a solution” to the industry’s fears over the imminent VAT rules change for uncooked foods although he provided no details on what has been agreed.

Philip Davis KC, in a statement issued by his office on yesterday’s meeting with the Retail Grocers Association and its members, renewed his promise that Bahamians families will benefit from lower prices when VAT on all uncooked foods is eliminated on April 1 although he made no mention of any change in VAT treatment.

Tribune Business exclusively revealed last week how Super Value had warned it could incur extra costs of between $300,000 to $400,000 per month, or around $3.6m to $4.8m per year, as a result of the Government’s decision to treat the uncooked food VA elimination as ‘exempt’ rather than ‘zero rated’.

While the latter treatment would have eradicated VAT at all stages of the supply chain, using the ‘exempt’ approach would mean only the consumer, or end purchaser, is not charged this tax. VAT will still apply at all levels in the supply chain, and ‘exempt’ treatment means businesses such as grocery retailers and wholesalers would have been unable to recover the tax paid on their input expenses associated with purchasing uncooked foods.

For example, if uncooked foods account for 60 percent of a merchant’s sales, it would have been unable to reclaim or recover 60 percent of the VAT paid on its light bill, store rents and maintenance expenses. As a result, operating costs will rise, and retailers had warned they may have to increase prices to offset the impact, thereby negating the impact of the uncooked food VAT elimination.

Merchants had also warned that introducing VAT ‘exempt’ treatment would make the tax much more complex to administer, increasing costs and time involved with this, and raising concerns they may miss filing deadlines and provide inaccurate return submissions. This was because they now have to correctly categorise products into those that are VAT ‘exempt’, ‘zero rated’, or taxed at 5 percent or 10 percent.

Mr Davis gave no indication of how this was all resolved in his statement last night, and major food retailers could not be reached for comment before press time. “Today I met with representatives from the grocery retail industry because my number one goal remains clear: Bringing down the cost of living for Bahamian families,” he said.

“Families across our country are working hard every day, and they deserve a government that stays focused on easing pressure at the checkout line and around the kitchen table. That is why we came together today in a spirit of co-operation and shared purpose.

“I am pleased we could find a solution so that Bahamians will benefit from the change of VAT on unprepared food in grocery stores beginning April 1. This is about helping families keep more of their money in their pockets. It is about making every day essentials more affordable. And it is about showing that when government and industry come together with goodwill and seriousness, we can deliver real results for the people we serve.”

The Prime Minister continued: “I believe that even when challenges are tough, progress is possible when we sit down together, speak honestly and stay focused on the people who sent us here to work on their behalf.

“That is the approach I have always tried to bring to leadership. I believe we can work together to solve our country’s toughest challenges. I believe in partnership. I believe in practical action. And I believe in building on the progress we have already made for the Bahamian people.

“Today’s meeting was another example of that approach in action. We listened to each other. We worked through the issues. And we agreed on a way forward that keeps the focus where it belongs; on delivering relief for Bahamian families,” Mr Davis added.

“April 1 will mark an important step. The full removal of VAT on unprepared food in grocery stores will help many families across The Bahamas as they manage the rising cost of living. My government will keep working every day to find ways to ease the burden on working people, support households, and move this country forward.”

Debra Symonette, Super Value’s president, last week confirmed that Super Value had calculated “the impact could be up to $300,000-$400,000 per month” from the VAT ‘exempt’ switch through lost or reduced profits, which translates into between $3.6m to $4.8m per year.

BISX-listed AML Foods, too, in its recent 2026 third quarter results filing, said: “Recently our industry was informed of a change in the treatment of VAT inputs, which is expected to increase our non-payroll expenses and impact our cost of goods by several percentage points. We are reviewing how we will address these changes ahead of its April 1, 2026, implementation.”

Another major grocery merchant, speaking on condition of anonymity, echoed Ms Symonette’s fears and estimated that the VAT ‘exempt’ treatment could increase non-staff costs by 7-8 percent from April 1, 2026. They added that the impact will not be confined just to food stores, but all businesses that sell uncooked food, including gas stations and pharmacies.

And wholesalers will also be impacted as they will have to adopt the VAT ‘exempt’ treatment on the uncooked food supplied to retailers. Tribune Business was told that, if wholesalers elect to pass on the extra costs incurred from being unable to reclaim VAT on input expenses related to uncooked food, the cost of goods will likely rise by a further 2-3 percent.

A retailer, speaking on condition of anonymity, added that the VAT ‘exempt’ treatment will further increase the cost and complexity for food stores when it comes to administering the tax and remitting the correct returns and sums to the Ministry of Finance. And financial observers warned that, as opposed to “eating” the increased VAT-related costs, food stores will simply “mark-up” and increase prices on items that are not price controlled to maintain their margins.

The Government has not publicly stated the justification for the VAT ‘exempt’ treatment, although Michael Halkitis, minister of economic affairs, has hinted it feels ‘zero rating’ treatment would give up too much revenue and result in the Public Treasury having to pay out large refunds and credits to the food distribution industry.

Dionisio D’Aguilar, the former AML Foods chairman, argued that the Davis administration will create an administrative and compliance “nightmare” for the industry if it proceeded with the current plans and structure for its latest bid to ease cost of living pressures for Bahamian households.

Mr D’Aguilar, also an ex-minister of tourism and aviation, told this newspaper that merchants would have to determine which products are VAT ‘zero rated’, ‘exempt’, or attract a 5 percent or 10 percent levy. He explained that they will have to undergo this process for all of the hundreds, if not thousands, of products they carry on their shelves, thereby increasing both the time and money that has to be devoted to tax administration and compliance.

“I spoke to someone else in the food business, and they were of the view that this is really going to add an enormous amount of complexities and stress in the business of running food stores because you are now going to have items that are VAT exempt,” Mr D’Aguilar added.

“You are also going to have items that are ‘zero rated’, you are going to have items that are taxed at 5 percent VAT, and you are going to have items that are taxed at 10 percent. When you get your supplies in, that can be pages and pages of items, and thousands and thousands of SKUs (stock keeping units). This is a nightmare because you have to go through all of your invoices to determine what is what.”