By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Cabinet minister yesterday said it was “oversimplistic”  and “problematic” to call for Value-Added Tax (VAT) to be removed from food items and other staple products.

  During his contribution to the 2015/2016 mid-year Budget debate, Michael Halkitis noted the suggestions that the Government should exempt certain products from the 7.5 per cent levy, such as food, private healthcare  and tuition education expenses.    

The Minister of State for Finance said: “These suggestions are overlysimplistic and have the potential to seriously mislead the Bahamian people.”

He added that these calls failed to take into account the potential negative impact on the private sector, government revenues, tax administration and the likely impact on the 7.5 per cent.

VAT rate.

Mr Halkitis said that exempting food items was a “second best” or “inferior measure” to reduce the negative impact of VAT on lower income households.

“While a lower income family will typically spend a higher proportion of its income on food, a higher income family will typically spend much more in absolute terms on food,” he explained.

“Exempting food from VAT would provide a much higher dollar benefit to the high income family than the low income family.”

Mr Halkitis said the Government’s assistance to families through its social safety net programme was the most effective way to relieve VAT’s burden on poor Bahamians.