The government’s considering introducing value added tax (VAT) at a rate of between 7 ½ and 10 per cent, a reduction that will be accompanied by expenditure controls, the Bahama Journal can confirm.
Sources have further revealed that the controversial new tax will “very likely” be introduced in early 2015, several months after the 2014/2015 new fiscal plan would have taken effect.
A lower tax rate would mean fewer exemptions.
Prime Minister and Minister of Finance Perry Christie had planned to exempt a number of items from VAT, making it possible for the “old age pensioner and others on very limited income to walk into a grocery store and purchase a number of healthy food items.”
These items included baby food, fresh fruit, fresh vegetables, fresh meat (chicken, beef, pork, mutton), seafood, bread, rice, grits, flour, oatmeal, sugar and vegetable oil.
“There are also exemptions for utilities for identified households that consume moderate amounts of these services. That is on electricity and public water and sewerage services,” the prime minister said at the time.
“Minimal impacts would also be sought for organised and properly constituted charities. These would be able to qualify for some refunds of their VAT costs.”
The Christie administration had also proposed to limit zero-rating under VAT primarily to exports.
But that plan will have to be revised, considering that VAT will be introduced at a much lower rate.
“We are trying to get to a certain position in four years, so this just means our adjustment period will be longer,” State Minister of Finance Michael Halkitis told the Journal yesterday.
“We just have to manage everything – our collection, hiring, spending – very tightly until we start to see VAT revenue.”
The government’s decision to decrease VAT’s introductory rate follow fierce backlash from both the public and private sectors.
Leading the outcry has been Super Value owner Rupert Roberts, who has warned that VAT would be disastrous to the country and that if imposed, the prices of items in his food stores would have to increase.
Mr. Roberts earlier this week said The Bahamas would accept a five per cent VAT with “no exemptions.”
Free National Movement Chairman (FNM) Chairman, Darron Cash this past weekend warned that having failed to deliver VAT or any other “meaningful” tax reform measure, the prime minister will almost certainly try to announce some other set of taxes to compensate during the budget communication in the House of Assembly this morning.
While keeping mum on the details of the new fiscal plan, Minister Halkitis insisted that 2014/2015 fiscal roadmap will “actually have no new taxes,” or rather or ”nothing to talk about.”
“I simply invite him to listen to the prime minister,” he said in direct response to Mr. Cash’s assertions.
The budget will be presented in the House of Assembly at 10:00a.m.