The Tribune

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.