By AVA TURNQUEST

Tribune Digital Editor

aturnquest@tribunemedia.net

Prime Minister Philip Davis today unveiled VAT reductions and Customs duty exemptions on a range of essential items as he proclaimed the 2025/2026 National Budget is the first balanced budget since the country's independence, including a surplus of 1.7%.

In his 2025/2026 Budget communication in the House of Assembly, Mr Davis explained the policy changes were guided by a believe that "the burden and benefits of economic activity should be shared equitably across sectors communities and generations".

There will be a VAT reduction to 5% on a range of products, including baby diapers, Depends, feminine hygiene products, prescription and non-prescription drugs, including for chronic conditions, medical and dental supplies, from September 1, he said.

Mr Davis said Customs duty will removed on factory cement, copper fittings, screws and nuts and bolts, and essential hardware. Duty will also be reduced on cleaning products, electric or battery shavers, juice extractors, trucks weighing 20 tons and above and filters.

The prime minister said duty exemptions on household appliances with the highest level of efficiency will be granted as the government furthers its commitment to reducing the country's emissions. 

Turning to environmental protections, Mr Davis announced a environment levy on seabeds, plus other fees on boating activity. He noted there will be a waiver on outstanding taxes on derelict properties once they are restored, with checks beforehand to ensure they are truly derelict.

Highlighting the country's positioning as a haven for private yachts and aircraft, Mr Davis said the government will introduce a frequent visitor card, valid for two years, intended for cruising for boats. A separate card will be introduced for propeller planes, intended for leisure, not commerce.

The PM announced plans to further modernize and regulate the cruise sector, noting its contribution to revenue has not kept pace with sector growth. He added there will also be greater enforcement including on VAT on all imports and services on the islands.

Mr Davis also committed the government will procure new fire trucks as it plans for a new police headquarters; and signaled an aviation programme including airport upgrades and expansions. He added that the government has secured $90m loan secured to enhance BahaMix.

During his communication, Mr Davis gave a briefing on the state of other economies around the world and highlighted economic conditions in the US, the country's biggest trading partner, noting a slowdown "is now widely expected".

He noted the 10% tariff imposed by the US could influence both tradeflows and international arrivals, adding that his administration is committed to talks with the US and CARICOM partners.

Speaking to the country's fiscal performance, Mr Davis said the country recorded its "highest output ever" as GDP expanded to 3.7% in 2024. He said a deeper look shows household consumption up 3.1% in 2024 "on the basis of an uptick in consumer confidence".

He furthered that agriculture, forestry and fishing industries also contributed to growth, with the sector expanding 21%.

Inflation stands at .4% and is forecast to rise to .9% in 2025, which Mr Davis said signals relative price stability. Unemployment stands at 8.7%, down from 9.5% in 2019, he said, noting it is the lowest unemployment since 2008.

In the first three quarters, Mr Davis says the revenue performance for April is "at a high level". He says April typically contributes 12% of revenue, and according to preliminary date this year accounts for 13% of total revenue over ten month period.

Mr Davis said there has been a boost in tax revenue, amounting to 70% of the Budget forecast. He noted a rise in recurrent expenditure, which he says includes towards a rise of $20m in employee salaries, a $7.1m rise in NIB payments, a rise in pension and gratuity payments, spending on goods and services driven by utility payments and financial transactions. 

Mr Davis pointed to a 16.6% decrease in the deficit, adding that since his government took office, the deficit has shown a "consistent downward trajectory".

Mr Davis said his administration is ready to support Bahamians who want to work hard and who want to seize new opportunities.

The budget debate opens next week, at which time Mr Davis said he will provide more details on the country's fiscal position and strategy.

Read the full budget communication here