1 April 2025 new 5% reduced VAT rate on basic foodstuffs
In a significant move to alleviate the burden of rising food prices, Prime Minister Philip Davis announced in a national address that the Bahamas government will slash the value-added tax (VAT) on food sold in food stores by 50 percent starting April 1.
“The rising cost of food is one of the costs that has hit many families the hardest,” Prime Minister Davis stated during his address. “Even though inflation is now slowing, prices remain higher than many find reasonable or affordable. And so tonight, I am pleased to announce a 50 percent reduction in the VAT rate on all food sold in food stores.”
Details of the VAT Reduction
Effective April 1, the VAT rate on food will drop from 10 percent to 5 percent. This reduction will apply to a wide range of items available in food stores, including:
- Fresh fruits and vegetables
- Baby food
- Lunch snacks
- Frozen foods
However, prepared foods—such as those sold in restaurants or ready-to-eat meals from food stores—will not be subject to the reduced rate. The new 5 percent VAT rate will also apply to the importation of all the food items listed.
“The effective date is April 1 to give merchants and food stores adequate time to adjust their pricing systems and ensure compliance,” Davis explained.
VAT in the Bahamas
Value-added tax, first introduced in the Bahamas in 2015, is a key component of the government’s revenue structure. Initially implemented at a rate of 7.5 percent, VAT was later increased to 12 percent in 2018 and subsequently adjusted to 10 percent in January 2022 as part of broader fiscal reforms.
While VAT remains one of the most significant sources of revenue for the Bahamian government, concerns about its impact on cost-of-living pressures have led to targeted measures like this reduction on food items.
“VAT is not the cause of the high price of food, but for those with the tightest disposable income, reducing VAT by 50 percent will make a difference,” Davis emphasized.
Fiscal Implications
Despite this reduction, Prime Minister Davis assured the public that the move would not derail the country’s fiscal objectives for 2025. “The reduction in VAT will not impact the fiscal targets for this year,” he said, highlighting the government’s commitment to balancing economic relief for citizens with responsible financial management.
The announcement comes amid heightened public scrutiny of food prices and inflation. Many Bahamians have been calling for interventions to ease the cost of living, and the government hopes this measure will bring some relief to families struggling to make ends meet.
Broader Economic Challenges
The VAT reduction is part of a broader effort by the Davis administration to address the rising cost of living. Inflation in the Bahamas has been driven by global supply chain disruptions, increased energy costs, and a reliance on imported goods, which comprise a significant portion of the country’s food supply.
By lowering VAT on food, the government aims to mitigate some of these pressures while continuing to implement measures to improve food security and support local producers.
As April 1 approaches, consumers and businesses alike will be preparing for the changes, with the government urging merchants to pass the savings on to customers.
