The Free National Movement is warning that the Davis Administration’s decision to classify the removal of VAT on uncooked foods as “exempt” rather than “zero rated” will not bring the cost relief the Government has promised. In fact, for many Bahamian families, it could make things worse.
When the Government announced it would remove VAT on uncooked food, it sounded like good news. Wholesalers, supermarkets, gas stations, pharmacies, and small neighbourhood food stores across Nassau, Grand Bahama, and every Family Island will all be affected. Under this approach, many of them will be able to claim back the VAT they pay on everyday operating costs, including freight, utilities, and commercial rent, the way they could before.
This move is creating a new hidden cost, and someone has to pay it.
According to news reports, food retailers estimate their non-staff costs could rise by as much as 7 to 8 percent from April 1. Wholesalers face the same burden, and if they pass those costs down the supply chain, the price of goods at retail level could rise by a further 2 to 3 percent.
When the FNM removed VAT on breadbasket items during our time in office, we used zero-rated treatment. That meant businesses could recover VAT at every stage of the supply chain, and the savings flowed through to consumers. The Davis Administration has now abandoned that approach and has never once explained why.
The result is predictable: food distribution costs go up, not down. Food stores face new, unrecoverable tax burdens on their operating costs. And families, already under enormous pressure, end up paying more, not less.
What is worse, neither the Prime Minister nor anyone from his government bothered to explain this new burdensome approach to so-called “tax relief”. Now, businesses are scrambling for clarity. The Government that promised this measure would help Bahamian families has not explained how their approach actually works or why it was deliberately changed.
The FNM calls on the Government to immediately revise the VAT treatment to zero-rated, as should have been done from the beginning, and to provide a full and transparent explanation of this VAT change, including its expected effect on food prices and small food retailers.
At a time when Bahamian families are already struggling, this country cannot afford policies that sound helpful but make life more expensive.