The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Super Value is bracing for an up to $400,000 per month hit due to the Government’s decision to treat the elimination of VAT on uncooked foods as ‘exempt’ rather than ‘zero rated’.

Debra Symonette, the 13-store supermarket chain’s president, told Tribune Business that the planned tax treatment means Super Value and all other food stores, as well as the likes of gas stations and pharmacies, will from April 1 be unable to reclaim or ‘net off’ VAT they pay on input expenses linked to uncooked foods.

As a result, they will be unable to recover VAT on all purchases and expenses related to their uncooked food inventory, which represents a significant share - if not the majority - of their business. Ms Symonette warned it would have “a detrimental” impact for the food store chain’s profitability, and is “definitely going to affect our bottom line”.

The ‘exempt’ VAT treatment was revealed to grocery merchants during a recent meeting with the Ministry of Finance. The Super Value president disclosed that she and other retailers are now urgently seeking a second meeting, given that the April 1 elimination of VAT on uncooked foods is now just 20 days away, in the hopes of persuading the Government to adopt a different approach that works for all sides including consumers.

Neither Michael Halkitis, minister of economic affairs, nor Simon Wilson, the Ministry of Finance’s financial secretary, responded to Tribune Business calls and messages seeking comment and confirmation of the Government’s position before press time last night.

However, other food retailers and advisers to the grocery industry confirmed that Ms Symonette’s concerns - that the industry will be unable to recover, or reclaim, the proportion of VAT input payments that relate to uncooked foods - is correct. The Super Value chief told this newspaper in a subsequent message that the food store chain has calculated “the impact could be up to $300,000-$400,000 per month” through lost or reduced profits, which translates into between $3.6m to $4.8m per year.

That would be a significant blow to any business. Another major grocery merchant, speaking on condition of anonymity, echoed Ms Symonette’s fears and estimated that the VAT ‘exempt’ treatment could increase non-staff costs by 7-8 percent from April 1, 2026. They added that the impact will not be confined just to food stores, but all businesses that sell uncooked food, including gas stations and pharmacies.

And wholesalers will also be impacted as they will have to adopt the VAT ‘exempt’ treatment on the uncooked food supplied to retailers. Tribune Business was told that, if wholesalers elect to pass on the extra costs incurred from being unable to reclaim VAT on input expenses related to uncooked food, the cost of goods will likely rise by a further 2-3 percent.

A retailer, speaking on condition of anonymity, added that the VAT ‘exempt’ treatment will further increase the cost and complexity for food stores when it comes to administering the tax and remitting the correct returns and sums to the Ministry of Finance. And financial observers warned that, as opposed to “eating” the increased VAT-related costs, food stores will simply “mark-up” and increase prices on items that are not price controlled to maintain their margins.

One argued that the VAT ‘exempt’ treatment will be counter-productive and could have the opposite effect to what the Government intends, namely to reduce the cost of living and make foods more affordable, especially given the renewed inflationary pressures likely to result from the Iran conflict’s impacts on global crude oil prices. Brent crude yesterday hit $92 per barrel despite 30 countries pledging to release 400 million barrels from their emergency oil reserves.

The VAT Amendment Bill 2026, which was debated in Parliament over the past week alongside the mid-year Budget, specifically states: “This Bill seeks to amend the VAT Act to eliminate VAT on qualifying unprepared food items, thereby reducing the cost of essential goods for consumers and on certain taxable imported goods.” However, it refers to the elimination of uncooked food VAT at both the wholesale and retail level, as well as at border importation, as ‘exempt’ rather than ‘zero rated’.

VAT ‘exempt’ treatment means that, while end-consumers will not be charged the tax at the point of purchase, it must still be paid by businesses at each stage of the supply chain. Therefore only food shoppers will see or feel any tax relief. But, had ‘zero rated’ treatment been employed, VAT would have been eliminated at each stage of the logistics network.

Ms Symonette, giving a hypothetical example of what the VAT ‘exempt’ treatment will mean, said that a business whose sales mix is 80 percent uncooked foods and 20 percent non-food will - from April 1 - only be able to reclaim VAT paid on input expenses related to the latter 20 percent. As a result, the business will now have to pay the remaining 80 percent VAT input tax itself unless it passes all, or some of this, on to consumers via price increases.

“The other issue is going to be on the VAT returns when we go from 5 percent to zero,” the Super Value president told Tribune Business. “It’s actually exempt; not zero rated. We’re not allowed to take away.. you know how we were allowed to take a credit for the inputs, we’re no longer going to be able to do that.

“We’ll have to split those amounts to what’s related to food and purchases related to non-food or cooked food. If your sales mix is 80 percent cooked food and 20 percent non-food, you will only be allowed to deduct [VAT] for 20 percent; 20 percent of what you purchase.

“That’s going to cost us quite a bit. We did do a calculation, and its’s definitely going to affect our bottom line because of the expense of the VAT.” Ms Symonette said Super Value and other food merchants only became aware of what the Ministry of Finance was planning when it invited them to a meeting on eliminating VAT on uncooked food.

“They actually invited us, which was a good thing, and advised us on how it was going to work for submitting returns,” she added. “They went over the whole method so we’d be aware of how it’s supposed to work. Since then, we were able to come back and discuss it among ourselves and determine it’s going to have an affect on our bottom line.”

Ms Symonette said the VAT ‘exempt’ treatment is effectively turning the VAT concept on its head because, in The Bahamas, it is now becoming a business tax when it is supposed to be a levy on the final consumer or purchaser. “It’s actually supposed to be a consumer tax,” she added.

This was echoed by another food retailer who, speaking on condition of anonymity, said: “VAT now has become a business tax.” They also pointed to the 2025-2026 Budget reforms, which prevent businesses from reclaiming VAT paid on construction materials and other inputs related to construction projects valued at $1m and more, adding: “The cost of investments will now increase as you cannot reclaim VAT on fixed assets.”

Ms Symonette, meanwhile, also voiced concerns that Bahamian wholesalers wil “have to do the same thing” as their retail customers when it comes to the VAT ‘exempt’ treatment. She added that the industry is seeking another meeting with the Ministry of Finance to make the case for the VAT treatment to be revised ahead of April 1.

“We’re hoping we can discuss it with them and work something out that will not be so detrimental to us,” the Super Value president told Tribune Business. “It’s going to take time to determine what we can take and not take.

“We have to go through invoices and clarify items, and what falls into food and non-food categories, and how much we should take-off. It’s going to be really complicated and time-consuming…. We’re hoping we’ll have a meeting with them before April 1 so we can get some things sorted and hopefully come up with something different.”

Another retailer agreed, adding: “Administration of the new rules will be onerous. Every invoice will have to be allocated between exempt and non-exempt items.” An adviser to food retailers, also talking on condition of anonymity, confirmed both the VAT ‘exempt’ treatment and Ministry of Finance meeting, and said of the sector: “It would appear basically that they are being hit again because of the inability to reclaim the VAT because it’s exempt.”

A financial analyst suggested the impact will the exact opposite of what the Government is seeking to do. “They’re going to mark-up the prices on the non-price controlled items,” they added of food retailers. “Unless they are price controlled it will not stop them marking up the price. They are just going to increase their prices in response to that.

“They are not going to eat that and why should they? This is not customer-friendly, this is not business friendly. This is not something that the Government should have said on the back end; it’s something you come out and explain. There could also be a compounding if the wholesalers pass their costs on.”

Ms Symonette, meanwhile, said Super Value will likely require between one to two weeks beyond the April 1 VAT uncooked food elimination deadline to alter all its product and shelf sticker prices accordingly. And she added that the implementation costs involved, especially man hours and overtime, will be significant for the second such exercise within the past year.

“It’s mainly going to be the issue of pricing the items from the 5 percent to zero percent,” she told Tribune Business, “because right now the prices on the shelf are VAT inclusive so we will have to adjust all the stickers on the shelf and the stickers on the items. We’re not actually required to put stickers on each item but we found customers want that and are try to oblige them.

“That’s going to be a major exercise and doesn’t happen overnight. The point-of-sale system won’t be very difficult. Our technology person should be able to adjust the program to switch from 5 percent in the system to zero, so even if consumers go to the shelf on April 1 and the price is not correct on the item, when they go to the register the correct price will be on the tape.

“It’s going to take a lot of man hours to change those sticker prices and a lot of overtime. There’s no way we can do all the prices for April 1,” Ms Symonette added. “One night they’ll be at 5 percent VAT and the next morning they won’t have any VAT on them at all. There’s no way we can go through all the stores and change the prices overnight.

“I guess it will be a couple of weeks; maybe a week. It actually will depend on how quickly our team is able to do it. It [overtime costs] could run into the thousands if we’re required to get extra help and they have to spend many hours.” The Government has estimated it will forego $15m in annual VAT revenues by eliminating the tax on unprepared foods.