Value-added tax (VAT) on breadbasket items disproportionately affect the poorest and those least able to withstand economic shocks.
Is it time to reconsider VAT on breadbasket items?
In March 2021, as the Minnis-led Free National Movement (FNM) administration floundered, the Progressive Liberal Party (PLP) offered a bold tax plan.
The PLP’s plan was to reduce value-added tax to 10 percent for one year if the party wins the next general election.
PLP Liberal Party Leader Philip “Brave” Davis said then, “Our proposal to cut VAT to 10 percent represents a modest decrease which will bring some relief to thousands of Bahamian families and help inject cash into an economy that desperately needs it.”
By September 2021, as the PLP made ready to govern the country, international ratings’ agency Moody’s weighed in on the proposed VAT decrease, as it once again downgraded The Bahamas’s economic outlook.
Matt Aubry, Organization for Responsible Governance’s executive director, who was quoted in a Tribune article, said that while the Progressive Liberal Party (PLP) had placed “a lot of stock” in cutting the VAT rate by two percentage points, even if just for a year, The Bahamas’ dire fiscal circumstances combined with Moody’s warning meant any revenue foregone as a result needs to be “offset” by gains in other areas that have yet to be identified.
In the euphoria of our PLP election win, few paid attention to those ominous words by Matt Aubry, when he noted “… any revenue foregone as a result needs to be offset by gains in other areas that have yet to be identified.”
Little did anyone realize, at the time that, “offset” and “other areas that have yet to be identified” would mean an additional tax on items that were previously VAT free!
VAT, we can all agree, is a regressive tax system. Such systems apply the same percentage of tax on products or goods purchased regardless of the buyer’s income. Inherently, such systems disproportionately affect low income earners.
If we add to this regressive system of taxation, additional tax on basic necessities, that were previously VAT FREE, is it not fair to say that low income earners, and those least able to withstand such economic shocks, will be disproportionately and adversely affected.
None of us can deny the fact that for months, in all of the numerous discussions and debates on VAT, absolutely no mention was made about bread basket items.
Adding VAT to breadbasket items epitomizes that age-old saying, “The one hand giveth; the other hand taketh away.”
With one hand the PLP gave economic relief, and with the other, they took it away for the most vulnerable, the most needy and the poorest.
Is it time, to fall on one’s proverbial policy sword and admit that jagged cracks exist in the plan?
If the economic status of the most disadvantaged further erodes, what have we truly gained?
If they are further frustrated in their attempts to make ends meet, what have we truly gained?
If the feeding program lines increase, if mental health deteriorates, if more children must be taken into charitable care, if the social services budgets increase, if crime increases, what have we truly gained?
A policy reversal on VAT breadbasket items would not only be popular and urgently needed, but results in this government administration doing the right thing.