Prime Minister Philip "Brave" Davis speaks during the EmpowerMen Forum at Margaritaville. Photo: Dante Carrer/Tribune Staff
By RASHAD ROLLE
Tribune News Editor
rrolle@tribunemedia.net
INCREASING value-added tax, raising water rates for heavy users and collecting patient fees at the Public Hospitals Authority are among the International Monetary Fund’s recommendations to help the government meet its debt target of 50 percent of GDP by 2031.
However, last night, the Davis administration said it has no plans to increase VAT and noted that the IMF’s recommendations align with its previous ones.
The IMF, in its latest Article IV consultation statement on The Bahamas, said some combination of measures would help the government achieve its target, with other options including replacing business licence fees with a 15 percent profits tax on large domestic firms, introducing a personal income tax for top earners, and removing the ceiling on property tax.
The IMF described the government’s proposed pension reforms for civil servants — introducing contributions for new hires and raising the mandatory retirement age — as “constructive” but recommended aligning the minimum retirement age between the National Insurance Board and civil service systems and indexing retirement ages to life expectancy for both.
The IMF warned that improving tax collection and benefiting from lower interest payments alone will not be enough for the government to meet its debt target.
The IMF praised The Bahamas for a “remarkable recovery” from Hurricane Dorian in 2019 and the COVID-19 pandemic, noting that economic activity and employment have returned to pre-pandemic levels while inflation has fallen “below pre-pandemic levels.”
Despite these gains, the IMF highlighted persistent challenges facing the country.
“Income per capita continues to diverge from that in the US,” the report said. “At the same time, expensive electricity, a shortage of skilled labour, and obstacles to business formation and expansion continue to weigh on growth.”
The IMF also flagged high government debt levels and borrowing costs, which surged during the pandemic. Additionally, The Bahamas’ vulnerability to natural disasters and rising sea levels underscores the need for investments in climate resilience and building fiscal buffers to respond to shocks more effectively.
A year after saying the outlook risks for the country are skewed to the downside, the IMF this year said the risks are balanced.
“Upside risks,” its report said, “include the execution of announced infrastructure and hotel construction projects and a higher-than-expected boost from an expansion of short-term rentals. The main downsides stem from large public debt rollover needs and the ever-present risk of natural disasters.”
The IMF noted that the country’s fiscal deficit dropped to 1.3 percent of GDP in the fiscal year 2024, an improvement from the previous fiscal year, driven by increased revenues from better tax compliance, a cyclical economic rebound, and targeted policy measures. Expenditure containment, including reduced transfers to public corporations and under-execution of capital projects, also contributed to the adjustment.
In a statement last night, the Office of the Prime Minister said: “While there is much more work ahead, many more Bahamians are now working, and inflation is now below pre-pandemic levels. Public finances are improving, borrowing costs are declining, and the nation is on a stronger, more sustainable path forward.
“The Davis administration is implementing the nation’s first comprehensive energy reforms, including the first utility-scale solar farms, to reduce prices for homes and businesses and to strengthen our electricity grid.“
Comments
ExposedU2C 1 month, 1 week ago
Our government and the Bahamian people need to start seriously asking themselves how is it the IMF and other similar international organisations are always so much more interested in telling us about how we should go about taxing ourselves to death rather than telling us how we can go about growing our economy in a sustainable way for the betterment of all Bahamians and not just the select few politically connected vultures among us that have been preying on the rest of us for decades now.
whatsup 1 month, 1 week ago
AGREED
whatsup 1 month, 1 week ago
No plans to increase VAT....at least not until after the next Elections
Porcupine 1 month ago
Yes. People need to listen closely to a lawyer's words. They are meant to distract, not to inform.
IslandWarrior 1 month, 1 week ago
It’s surprising that the IMF didn’t mention the Bahamas’ potential to benefit indirectly from the shipping activities in the Old Bahama Channel. This busy shipping lane connects vessels from the Panama Canal, the Caribbean, and South America to Europe and North America. With a large part of this activity happening within the Bahamas’ Exclusive Economic Zone (EEZ), there’s a strong chance for the country to gain financially from this traffic.
M0J0 1 month ago
take the vat off medication
whatsup 1 month ago
This cold hearted gov should remove VAT from all medical services, medication and senior citizens
zemilou 1 month ago
In the IMF report, it states that " inflation has fallen back below pre-pandemic levels." Perhaps overall, but there is little evidence of that for the average retail customer, especially in the grocery stores.
(Source: https://www.imf.org/en/News/Articles/20…)
TalRussell 1 month ago
Comrades, What's your doubt in the face of? -- Cabinet, gives nod to $100 million construction of three prisons for imprisoning even greater numbers popoulaces' in medium, high and super-maximum prisons -- and "Brave" Premiership -- 'Hasn't even given thought' to raising your VAT, taxes' nor fees. -- right?
IslandWarrior 1 month ago
The retail community in the Bahamas has systematically exploited Bahamians, an issue that dates back to the days of colonial exploitation. From the arrival of Columbus to the present day, this practice has persisted in various forms, with retailers seizing every possible opportunity to impose excessive price hikes on local consumers. Historically, Bahamians have been subjected to unjustified price inflation, often attributed to external factors such as war in the Gulf, hurricanes, the COVID-19 pandemic, and now global inflation. These crises are used as convenient justifications for raising prices, but once the crises subside, the elevated costs remain entrenched, placing an enduring financial burden on the Bahamian people.
This pattern becomes glaringly apparent when comparing local prices to those in neighboring regions, particularly the United States. Our next-door neighbors enjoy retail prices that are often a fraction of what Bahamians are forced to pay, sometimes as much as 100 times lower than what is available locally. For instance, basic goods and commodities that are necessities for everyday life are sold at exorbitant rates in the Bahamas, with no reasonable justification for such stark discrepancies beyond profiteering.
This systematic exploitation reflects a broader issue of limited competition, excessive import markups, and a lack of regulatory enforcement to protect Bahamian consumers from such abuses. Retailers capitalize on the lack of alternative options and the heavy reliance on imports, effectively creating a captive market where consumers have no choice but to pay inflated prices. This is not merely an economic issue but a moral one, as it disproportionately impacts those who are already financially vulnerable.
The time has come for Bahamians to demand accountability and transparency in the pricing mechanisms within the retail sector. Regulatory bodies must step in to ensure fair trade practices, establish price controls where necessary, and encourage competition to bring relief to consumers. Moreover, policies should be developed to support local production and reduce dependence on imported goods, which would help stabilize prices and create a more equitable economic environment for all Bahamians. The era of accepting unjustified price exploitation must end, and the retail sector must be held accountable for its long-standing practice of placing profit above the well-being of the people it serves.
Dawes 1 month ago
Would be a good idea for you to set up a retail company and not charge those excessive prices. You would become the go to retail store and put all the others out of business. Why not show them how its done!!!
Porcupine 1 month ago
I agree. Why allow a bunch of know-nothing politicians to have a say in economic activity. Allow the free market to work. Based on competition. Yet, anyone who tries to do business in this country is up against an utterly failed and flawed system. We see it, and hear it, everyday.
Socrates 1 month ago
You can listen to IMF now or follow instructions later. Plenty financially failed states ahead of us, many in the Caribbean. They have seen this movie before. Don’t blame the messenger because you don’t like the message.
sheeprunner12 1 month ago
The New Day Government has raised every other tax/fee/rate ............ so he can boast that he is not raising VAT.
The country is almost impossible for a person to live in if he/she is not making at least $4,000 per month ............. You are basically living hand to mouth otherwise.
Brave is not going to fix that .............. he is too busy travelling and trying to fix Haiti
birdiestrachan 1 month ago
And the not so smart FNM s want VAT off flour cooking oil butter and magarine which benefits bakeries and hotels and not poor people
TalRussell 1 month ago
Constituents' Families' right to have mounting concerns if their best clothing is to come from discarded "crocus sack." -- Yes?
juju 1 month ago
Why are the cost of goods ( food) still increasing weekly??????!
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