The government's decision to reintroduce value-added tax (VAT) on breadbasket items is not adding an additional burden to Bahamians, Minister of Economic Affairs Michael Halkitis said yesterday, adding that the reason why prices are high in local food stores is being driven by inflation in the United States.

“In the US they have record inflation — the highest in the last 40 years — to the point their central bank is talking about increasing interest rates to help control it,” Halkitis said.

“In mainland Europe, the Europeans are experiencing the same thing: very high inflation; 5.1 percent I think it was in January. They have not yet decided to increase interest rates to address it.

“In the UK, their government is increasing interest rates to address the issue of inflation, so the fact that we import most of the goods — food and everything else — means that we will import inflation.”

Halkitis said the government remains hopeful that the initiatives being taken by the United States will make the situation a temporary one.

Inflation-fueled price increases in The Bahamas seemed to coincide with the reduction of VAT from 12 percent to 10 percent and the reintroduction of the tax on breadbasket items.

The government insisted that Bahamians would not feel the reintroduction of VAT on those items because they would be saving more with the overall reduction of the tax.

However, Super Value Chief Financial Officer Debra Symonette said on Monday the 10 percent VAT increase on breadbasket items, coupled with inflation appears to present Bahamians with “a double whammy”.

Halkitis denied this was the case yesterday.

“I think it’s a good thing that we decreased it across the board from 12 percent to 10 percent,” he said.

“That mitigates some of the issue. I would just like to reiterate the whole issue of the breadbasket which forms, in reality, a very small portion [of shopping lists]. Even if you ask food store suppliers, like Super Value, they will tell you that it forms a very small portion of people’s overall spending.

“I think overall our policy should actually help to mitigate some of that impact of the global inflation.”

Last October, Prime Minister and Minister of Finance Philip Brave Davis dismissed criticisms the opposition and some members of the public made over his administration’s decision to place VAT on breadbasket items

Davis said, “I invite them to go and look at the modeling that was done by independent advisors who are more familiar with tax matters. It’s up on our website. They’ll see how we arrived at it. It will be a tax-neutral matter.”

Click here to read more at The Nassau Guardian