By LEANDRA ROLLE

Tribune Staff Reporter

lrolle@tribunemedia.net

ECONOMIC Affairs Minister Michael Halkitis maintained on Friday that removing value added tax on breadbasket items is not feasible at this time, noting the tax regime was a necessary initiative meant to reduce government borrowing and improve the nation’s overall “fiscal health.”

Mr Halkitis was responding to increased calls for the government to eliminate VAT on breadbasket items, which had been zero-rated under the former Minnis administration.

Since the tax was implemented in January, the government has frequently come under attack from the opposition, which has sought to portray the Davis administration as insensitive and heartless in view of the move.

Some in the business community have also backed calls for the removal of VAT on the food items, including Super Value’s President Rupert Roberts.

Asked to respond to those calls, Mr Halkitis maintained that the government did not intended to change its position on the policy, which he said followed best world practices and expert advice.

“It’s not feasible,” Senator Halkitis said during a press briefing at the Office of the Prime Minister Friday.

“When we first introduced it at seven and a half percent, our advice after considerable deliberations and discussions and back and forth with the private sector, with academia, with scientists and scholars - the best policy is to have a low rate with minimal exemptions which is what we did and it was very effective and lauded around the world as being effective.”

“When the FNM administration came in in 2018 and they made a promise that they would take it off the bread basket items which they did, but at the same time that they took it off the bread basket items, in order to be able to do that, they raised the rate from 7.5 percent to 12 percent and so I hear this call coming mostly from the political corners about doing this because okay, it’s a good political point to make, but to recognise that when you begin to introduce exemptions, the only way you can do it is if you pay the higher rate on everything else.

"So, we have studied this and we’ve gone back and forth and our best advice is a lower rate that’s the 10 percent, lower than the twelve, but with minimal exemptions because it’s more efficient and again, it’s not something that we did haphazardly," he also said.

Mr Halkitis said while the government is sympathetic to the plight of vulnerable Bahamians, it also cannot ignore the nation’s precarious fiscal situation, pointing to the country’s ballooning debt among other things.

He said: “We would love for the government to be able to say that we’re taking the tax off this, we’re taking the tax off of gas but if we do that, we have to get money from somewhere else and that’s just the way it is. Our debt has gone up by $2b in the last two years. If we don’t earn it through taxes and revenue, we have to borrow it. I hate to be the one who has to keep saying this because I’m sure nobody wants to hear it but it’s just the reality that government’s fiscal health is very important because it impacts all of us and so we are hopeful the situation normalises."

In January, VAT was reduced from 12 percent to 10 percent across the board with few exemptions, but also reintroduced on breadbasket items.

Education Minister Glenys Hanna Martin on Thursday told parliamentarians that she struggled with the Davis administration’s decision to return value added tax to breadbasket items.

Meanwhile as it relates to the country's economic recovery, Mr Halkitis said there have been positive signs.

"We are trending ahead in terms of revenue and in terms of expenditure, we're slightly down from our target, three per cent down and in terms of the deficit, it's currently showing just under $345m for the first nine months and we had forecasted $850m for the entire year.

"So, we're ahead of schedule because mostly the revenues are performing very well and we so far have been able to keep a fairly good range on expenditure," he said.

He also said the World Bank has predicted the economy will grow by eight percent, an increase from the initial six percent forecast.