The Tribune

By JADE RUSSELL

Tribune Staff Reporter

jrussell@tribunemedia.net

THE Davis administration yesterday unveiled its first Budget since securing a second term, projecting a $223.1m surplus while offering targeted relief to first-time homeowners and households and raising revenue from the country’s largest businesses, foreign-owned property, immigration applicants and commercial users of public services.

Finance Minister Michael Halkitis told the House of Assembly that the 2026/2027 Budget estimates $4.4bn in revenue against $4.1bn in expenditure, including $3.7bn in recurrent spending and $415.8m in capital expenditure.

The government projects a fiscal surplus equal to 1.2 percent of gross domestic product and a primary surplus of 5.2 percent of GDP, with the debt-to-GDP ratio expected to fall to 59.9 percent by the end of the fiscal year.

However, the projected surplus is lower than previously forecast in the 2025 Fiscal Strategy Report. Mr Halkitis said the revision reflected uncertainty over energy and import costs amid Middle East tensions, along with a decision to increase support for the Public Hospitals Authority and invest further in hospital services.

The Budget, delivered just over two weeks after the Progressive Liberal Party won the May 12 general election, places the administration’s claims of continued fiscal recovery against the reality that the government recorded a $157.5m deficit during the first nine months of the current fiscal year.

That deficit, recorded at the end of March 2026, was higher than the $130.1m shortfall during the same period of the previous year, although the government recorded a $294.5m primary surplus, meaning revenue exceeded spending before interest payments were counted.

Revenue for the nine-month period reached $2.5bn, or 65.3 percent of the full-year budget target, while expenditure totalled $2.7bn, or 70.7 percent of projected spending. Interest payments on public debt reached $452m.

Central government debt stood at $12.5bn at the end of March, a 6.4 percent increase compared with March 2025. Mr Halkitis maintained that economic growth outpaced the increase in the central government debt stock and forecast that the debt burden would continue to decline over the medium term.

The government expects to achieve a surplus for the current fiscal year, partly on the strength of $130m in expected collections under the Domestic Minimum Top-Up Tax Act, which imposes a minimum effective tax rate of 15 percent on large multinational enterprise groups operating in The Bahamas. Those collections are expected in June.

Mr Halkitis said the taxpayer base for that new revenue category could exceed the fewer than five taxpayers anticipated when last year’s Budget was prepared, potentially improving the final fiscal outturn.

For the coming fiscal year, the Budget’s most prominent relief measure targets first-time homeowners. The government is expanding zero-rated VAT treatment to include duplexes, triplexes and fourplexes where at least one unit is occupied by the first-time homeowner.

The relief will apply to the entire building rather than only the owner-occupied portion, reducing upfront costs for qualifying buyers or builders while allowing them to generate rental income from additional units. Mr Halkitis said the measure takes immediate effect.

The government will also raise the first-time homeowner exemption under the Real Property Tax Act from $500,000 to $600,000 and broaden exemptions available to eligible first-time homeowners.

But the administration is also seeking greater contributions from major businesses and foreign property owners.

Businesses earning more than $175m annually will face a 0.25 percentage point increase in the Business Licence rate, bringing it to 1.5 percent per year. Mr Halkitis said the country’s largest businesses had benefited substantially from the economy’s performance and had the capacity to contribute more to national development.

The government is also introducing a two-tier Real Property Tax system distinguishing between Bahamian-owned and foreign-owned property.

A new category of foreign-owned property will attract a rate of 0.625 percent, with a maximum cap of $200,000. The system will no longer be based on whether a person spends at least 180 days in The Bahamas, but on whether the property is used as a residence.

Other household relief measures include reduced duties on common household plastic items, paper goods such as tablecloths and serviettes, and sanitary products.

The government will remove the 45 percent duty on chair lifts designed for elderly people and persons with disabilities by establishing a duty-free tariff line for the equipment, which had previously been classified under general machinery.

Duties on human hair and wigs will also be reduced and their classifications revised so they are no longer grouped with cosmetic items such as false beards and eyelashes. The measure is intended to assist people with cancer, alopecia and similar conditions.

Registration fees for non-motorised bicycles will be eliminated, while the government plans to modernise rules governing electric bicycles.

The Budget also outlines new measures aimed at broadening revenue collection and improving enforcement. The government plans to introduce the Bahamas Identification Number during the fiscal year to strengthen compliance and support enforcement, while pursuing public consultation on a review of the Business Licence Act, consolidated fiscal incentives legislation and the creation of a national domestic revenue agency by statute.

In the maritime sector, the government will introduce a formal registration regime for foreign-owned recreational vessels and non-resident users of Bahamian waters, along with clearer classifications, fee schedules and designated anchorage zones.

Mr Halkitis said the measures were aimed at foreign users rather than Bahamian boaters and were intended to ensure that those using Bahamian waters contribute to the system.

The government will also reintroduce landfill tipping fees in New Providence for large waste producers and introduce seabed lease fees for commercial and industrial use of marine space. Fixed penalties for environmental nuisances are also planned.

Immigration fees will also be adjusted, with changes to permanent residency charges, higher fees for certain senior and executive management work permit categories and a late payment regime.

The government plans to amend the Immigration Act to make zero coupon bonds more attractive to people seeking economic permanent residency. It will also revise the Trusted Traveller Programme by replacing per-visit fees with annual fees for frequent business visitors and reduce work permit fees for caregivers assisting elderly or bedridden people.

On expenditure, the Budget allocates $11.6m for the construction and upgrading of clinics in Abaco, Andros, Acklins, the Berry Islands, Crooked Island, Exuma, Eleuthera and Long Island.

The government is also advancing a new hospital facility in New Providence with an initial investment of approximately $20m alongside international financing arrangements.

Mr Halkitis presented the Budget against what he described as continued economic expansion. According to figures cited in the communication, real GDP grew by 3.8 percent in 2025 after growth of 4.2 percent in 2024, while the International Monetary Fund projects growth of 2.1 percent for 2026.

Inflation averaged 0.6 percent in 2025 and is projected at about 1.6 percent this year. Preliminary Bahamas National Statistical Institute figures showed unemployment falling from 10.8 percent in March 2025 to about 9.3 percent in June 2025.

Tourism remained a major engine of the government’s economic case, with approximately 12.5m visitor arrivals recorded in 2025, an 11.4 percent increase over the previous year. By March 2026, total arrivals stood at about 3.9m, up 17.5 percent over the same period in 2025, driven largely by sea arrivals.