By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition's chairman yesterday accused the Government of taking credit for "undoing half the trauma" it had caused by imposing 10 percent VAT on medicines, feminine and baby products.

Dr Duane Sands, reacting to the Prime Minister's Budget announcement that the VAT rate is being slashed in half to 5 percent for baby diapers, women's hygiene products, medicines and medical and dental equipment, also challenged why the Government could "not go all the way" and eliminate the tax entirely as the Opposition has been urging since early 2022.

He hit out after Philip Davis KC, in his 2025-2026 Budget unveiling, disclosed several measures designed to ease the cost of living crisis for Bahamian families while acknowledging that all citizens are not feeling the impact from the multiple economic benefits and improvements touted by his administration.

"We have made substantial gains strengthening our country’s fiscal outlook and our economy," he told the House of Assembly. "But before I share the good news, I want to say this. We know that our country’s recovery and growth have not yet reached all Bahamians.

"Good numbers on a spreadsheet are better than bad ones, but we talk to Bahamians every day who are still under a lot of pressure, people struggling to find good-paying work they can rely on, people who worry about how or even whether they can build a secure future."

In a bid to further combat the inflation, and high prices, which have plagued The Bahamas and the wider world post-COVID, Mr Davis moved to expand the VAT relief beyond the 50 percent rate cut - also to 5 percent - that took effect on all uncooked food items with effect from April 1, 2025.

"Bahamian families have struggled under the weight of high prices for food, household items and basic hygiene necessities. This administration understands their difficulty, and in this Budget, we are acting decisively to bring relief to the people," he added.

"As part of the ongoing efforts to promote affordability, we will be reducing the VAT rate to 5 percent on a range of products that are crucial for the well-being of our citizens." Besides diapers and women's hygiene products, those items set to enjoy a VAT rate cut from September 1 include both prescription and non-prescription drugs, including those for persons with chronic illnesses.

Mr Davis added that "medical and dental supplies such as needles, blood pressure machines, lancets, dental cements and other dental fillings" are also included in the five percentage point rate cut, along with other medical and therapeutic products such as cell therapy items.

"These reductions, which will take effect on September 1, 2025, are aimed at ensuring that Bahamians of all ages and stages of life can access essential products without the added burden of high taxes," Mr Davis said.

The Opposition, which had eliminated VAT on medicines under the Minnis administration, immediately went on the attack by arguing that the Government has finally acted on what it had been calling for from at least early 2022 after the 10 percent levy was reimposed.

"We've been calling for it for some time," Dr Sands added. "They put VAT on those items and are now reducing it by half. Why couldn't they have gone all the way and taken it off completely? It certainly doesn't go far enough, and they're congratulating themselves for undoing half the trauma they themselves caused. But I guess late is better than nothing.

"They also talk about a Budget surplus. There is no surplus in the home Budget of an ordinary Bahamian right now. Many Bahamians are finding it extraordinarily difficult to make ends meet. While these tokens will be appreciated, it's only a drop in the bucket compared to the red ink that individuals and families see every week, every month....

"Overall, I'm sure people will be happy to see VAT is down to 5 percent on items that should not have been VAT-able in the first place, and let's hope they have a conscience and eliminate VAT completely as we had recommended."

Mr Davis made no mention of how much revenue the Government estimates it will forego by reducing the VAT rate to 5 percent on these items. The reduction was likely delayed until September 1 to give food stores, pharmacies and other merchants a chance to adjust their point-of-sale and other systems, with the changes likely to add a little more complexity to VAT's administration.

"Budgets are about choices, and there are other ways they [the Government] could save money as opposed to grabbing it from the pockets of struggling Bahamians," Dr Sands added. "There are many, many examples of expenditure overruns, cost overruns where with a little bit of discipline they could save money and give the average Bahamian a break. We didn't hear enough of that. As a matter of fact we didn't hear any of that.'

Michael Pintard, the Opposition's leader, echoed Dr Sands' response to the VAT rate cut by telling Tribune Business: "They are congratulating themselves for a problem they created because some of those items were zero-rated when they came into government.

"It was they who put 10 percent on it and now, under duress and pressure, are taking it off after creating a set of circumstances that they themselves were responsible for. They are attempting to create the impression they are doing something novel and different when it was them that created the problem."

Mr Davis, meanwhile, yesterday also unveiled a series of Customs duty reductions and eliminations. "We are also taking steps to reduce the cost of fuel sources used by numerous households. We are removing the 45 percent excise duty on butane fuel mostly used in portable stoves," he added.

"Many Bahamians rely on this fuel for a hot meal, whether day-to-day or during emergencies. This is part of our broader commitment to build resilience and affordability into everyday life, especially where it may help the most."

Customs duties are also being removed on refractory cement, mortars and concrete; copper fittings; screws; and nuts and bolts, plus "simple but essential hardware". Rates are also being cut for filters of all kinds, including those used for water and air conditioning; cleaning products; electric or battery-operated shavers; juice extractors; and trucks weighing 20 tons and above.

"Duty exemptions on household appliances with the highest level of energy efficiency will be granted. Freezers, air conditioners, freezers and gas and electric water heaters will be duty free, once confirmed that the appliance will make a positive impact on climate change initiatives," Mr Davis added.

"These exemptions encourage Bahamians to adopt cleaner technologies, directly contributing to our climate goals and a sustainable future."