The Tribune

By JADE RUSSELL

Tribune Staff Reporter

jrussell@tribunemedia.net

THE government’s 50 percent cut in Value Added Tax (VAT) on food sold in stores took effect on Tuesday, with Economic Affairs Minister Michael Halkitis reporting a smooth transition for businesses.

The VAT rate has dropped from ten percent to five percent for all unprepared food items, including fresh produce, frozen goods, baby food, and snacks. Prepared food in deli sections remains subject to the full tax.

The move, first announced in Prime Minister Philip “Brave” Davis’s New Year’s address, is meant to provide immediate relief for families facing rising living costs.

Speaking at a press briefing yesterday, Mr Halkitis said businesses were given three months to prepare for the change and have reported no issues or disruptions. The VAT cut is the latest in a series of tax relief measures under the Davis administration, which previously reduced the overall VAT rate from 12 percent to ten percent in June 2022.

The relief comes as The Bahamas braces for potential economic fallout from escalating global trade tensions.

On Wednesday, former US President Donald Trump announced a new round of tariffs, including a ten percent baseline tax on imports from all countries and steeper rates for those with trade surpluses with the US. The tariffs have escalated fears of a renewed trade war.

The US Trade Representative has also proposed imposing port fees ranging from $1m to $1.5m on Chinese-built vessels or operators using such ships, a move aimed at curbing China’s dominance in global shipbuilding.

Asked whether the uncertainty surrounding US trade policy could shorten the lifespan of the VAT cut, Mr Halkitis pushed back.

“We’re not going to put something else. There’s no shelf life. This is a permanent reduction. There’s no new tax is coming in a budget to replace this,” he said.

He noted the government expects to forgo roughly $30m in revenue annually from the VAT cut, but said it remains committed to easing the burden on consumers.

Despite the external pressures, Mr Halkitis urged caution and continued promotion of the local economy.