Source gov.bs
See also VAT rates in Bahamas
Extract:
One of the most discussed and anticipated aspects of my Government’s Economic Plan is the decrease in the nominal rate of Value Added Tax (or VAT) from 12% to 10%. This reduction in VAT was proposed to offer modest but important relief to Bahamians.
I am very pleased to announce we are moving forward with this reduction in the VAT rate. I believe it will help Bahamians and help our economy.
And the reduction is being managed in a way that is fiscally responsible.
The Ministry of Finance team has worked long hours, along with some of the brightest minds at the University of The Bahamas and the Government and Public Policy Institute, as well as with international consultants, to perform extensive modelling and financial analysis to ensure that the VAT reduction does not adversely affect our fiscal position.
With the reduction in the VAT rate, we are eliminating the zero-rating under VAT on a variety of items. Price controls are in place to ensure breadbasket items will be fairly priced.
The VAT exemption for electricity bills and the special economic zones are untouched. Madam Speaker,
When VAT was first introduced in The Bahamas in January 2015, it was designed as a broad-based tax similar to the New Zealand model, deliberately simple in design and ease of administration with relatively few exemptions. The implementation of VAT in The Bahamas was efficient, and we were praised internationally for our very successful launch. In recent years, however, the country’s tax policy has moved far away from the original plan and intent. Indeed, through the actions of the previous administration, the VAT base has been eroded by the implementation of many classes and types of items being zero rated.
These changes were considered by experts to be ill-advised and poorly executed, who believe zero rating schemes are an ineffective and inefficient way to provide relief to the vulnerable in society.
Instead, there is a preference for targeted relief such as conditional cash transfer programmes. My Government is committed to increasing direct cash transfers to families who need the support with the reintroduction of the RISE programme, about which you will hear in more detail from the Minister of Social Services and Urban Development.
Based on the modelling and analysis conducted by my team, we are confident that with the elimination of zero-rating categories, and the economic uplift to consumers, government revenues are protected. The model and the analysis of the results will be published on the Government’s budget website. I requested that the modelling with respect to the 2018 increase in VAT also be published but I have been advised that it is conveniently no longer available.
