PM: VAT hike to protect future generations
Prime Minister Dr. Hubert Minnis has acknowledged the 60 percent increase in value-added tax (VAT) will create some challenges, but insisted the move is to protect future generations.
Minnis, who wrapped up debate on the 2018/2019 budget in the House of Assembly today, said the government only settled on increasing VAT to 12 percent after ruling out other options.
“The hard reality is that there are very few feasible options available,” he said.
“…We would have looked at doing nothing, what impact it would have had on our country. That was not an option. We would have destroyed our future generations.
“We would have looked at 10 percent and the result was still not good for future generations. The result may have been good for us, but it was bad for the future.
“We looked at 15 (percent). That was not an option. That is too much pain for anybody to burden.
“We looked at 12 (percent) and we realized there would be some challenges even with 12 (percent), but we know how to overcome those challenges. Therefore, we had increased it to 12 so as to protect the future generations.”
VAT will go from 7.5 percent to 12 percent on July 1.
The government projects VAT will generate $663 million in tax revenue in 2017/2018, and more than $1 billion in the upcoming fiscal year.
The Minnis administration argues the tax increase is necessary to close the deficit and slow the state’s rate of borrowing. The opposition criticized the government’s tax plan, arguing it places additional tax burden on Bahamians just as the economy started growing. The Bahamas is forecasted to grow by 2.5 percent this year, and 2.25 percent in 2019.
Minister of Finance Peter Turnquest announced the VAT increase in the budget communication in the House on May 30.
Turnquest also announced the removal of VAT from breadbasket items, except sugar, which will no longer be on the breadbasket list. This means that there will be no VAT on butter, cooking oil, mayonnaise, grits, cheese, corned beef, evaporated milk, margarine, rice, flour, bread, tomato paste, baby cereal, baby formula, soup, broths, baby food, powdered detergents, condensed milk, soaps, fresh milk and mustard.
This measure comes into effect on August 1.
Education: Benedict College, BA in Mass Communications