The Tribune

By EARYEL BOWLEG

Tribune Staff Reporter

ebowleg@tribunemedia.net

THE chairman of the Clearing Banks Association has sharply criticised the Davis administration’s decision to remove VAT from unprepared food sold in grocery stores, calling the move “an uninformed and an understudied or not sufficiently studied exercise” that sacrifices fiscal discipline for political appeal.

Gowon Bowe, Fidelity Bank’s chief executive, noted the policy delivers the same tax relief to higher-income earners as it does to those struggling most, a blunt approach he argued fails to target cost-of-living pressures effectively while risking long-term revenue stability.

He questioned who the measure was truly designed to help, noting that VAT applies across a wide range of goods and services beyond groceries, including fuel and utilities. In that context, he said, the policy resembled a “hacksaw” rather than a targeted “scalpel”.

“If,” he said, “I'm giving the same benefit to the person who is fortunate as I am to the person who's less fortunate, is this the most appropriate approach whilst maintaining fiscal responsibility? And my answer to that personally is no.”

His comments followed Prime Minister Philip Davis’s announcement on Monday night that VAT would be completely removed from food sold in grocery stores, a major policy shift the government said was aimed at easing persistent cost-of-living pressures.

Mr Bowe pointed out that the Davis administration, while in opposition, had criticised the Minnis administration’s approach to VAT, which involved a mix of exemptions and rate increases. After taking office, Mr Davis himself referenced an International Monetary Fund review that found the exemption-heavy VAT regime reduced efficiency, lowered revenue and increased administrative and compliance costs.

Against that backdrop, Mr Bowe questioned the consistency of the new policy direction, particularly alongside measures such as the reintroduction of the RISE programme, which he described as effectively increasing Social Security contributions through a rebalancing of tax collections.

“In the proposed scenario,” he said, “the government is basically giving a tax exemption to all and sundry. The question is, will the less fortunate among us be happy with the most fortunate among us getting the same tax benefit, which will result in the government of the day having to increase taxes on all of society in order to make up for any shortfall?”

He also questioned the practical impact of the VAT removal, arguing that the savings on grocery bills would be marginal when set against rising costs elsewhere.

He said: “We say, just as an example, we have a situation where ultimately the grocery bill is $100, and now it is $10 in VAT that is paid. Even if the entire grocery bill was zero in terms of VAT, the actual benefit would only be $10 and the question is, will that $10 saving in one set of taxes compensate for the cost of fuel, compensate for the cost of other services that are being incurred, and other cost of other goods, because we don't live by bread alone?”

Mr Bowe described tax policy as a “zero-sum game”, warning that revenue forgone in one area must eventually be recovered elsewhere. He argued that while tax cuts are sometimes justified to stimulate economic activity, this measure was not designed to boost productivity and would do little to assist those under the greatest financial strain.

“The Bahamas is doing better than it was coming out of COVID because the economy had refloated but it is not performing at its optimum, and the reason it's not is because we continue to make decisions the way this particular VAT decision was made, by popular vote, as opposed to studied analysis,” he said.

He argued that 2026 should focus on consolidating economic gains rather than prematurely harvesting them, warning that repeated short-term policy shifts undermine the country’s ability to achieve sustained growth.