NASSAU, BAHAMAS- The Fiscal Responsibility Council (FRC) has warned that the Government’s projected $130 million revenue from the Domestic Minimum Top-up Tax (DMTT) was unlikely to be realised, raising concerns over fiscal performance and the reliability of key revenue assumptions in the Mid-Year Budget.
“The FRC notes that with the implementation still undergoing developments by the March 31st submission deadline, it is unlikely that the $130 million revenue projection for the Domestic Minimum Top-up Tax (DMTT) will be realised, which could have significant implications for the final budgetary outcome,” the report stated.
The Bahamas passed the Domestic Minimum Top-Up Tax Act 2024, introducing a 15 percent corporate income tax on large multinational enterprises (MNEs) with annual revenues exceeding €750 million, applied retroactively from January 1, 2024. The measure is intended to raise approximately 1 percent of GDP (over $140 million) in additional revenue and applies to large foreign-owned entities rather than local Bahamian businesses.
The FRC cautioned that uncertainty around implementation and collection posed risks to the fiscal outlook, noting that failure to achieve the projected DMTT intake could materially affect the year-end position.
It also warned that there was “material risk to the Government achieving a budget surplus of $75.0 million,” citing geopolitical tensions and uncertainty in key revenue streams, particularly tourism-linked taxation.
Overall revenue performance was described as under pressure, with the FRC noting underperformance in both tax and non-tax categories compared to FY2024/25.
“The FRC notes that abatement in stopover arrivals and a possible need to strengthen cruise business enforcement and compliance, may also be contributing factors to the gap in performance,” the report stated.
The Council further warned that “tempered expectations associated with the DMTT, expanded VAT concessions, and potential downside risks from global tensions… could result in further underperformance in revenue over the final six months of the fiscal year.”
On fiscal reporting, the FRC again stressed reform urgency, stating that “implementation of accrual basis accounting should be an urgent priority,” citing the need to properly capture unpaid invoices, arrears, and broader Government liabilities.
It reiterated that cash-based accounting does not fully reflect Government obligations, while accrual accounting would provide a more complete picture of the State’s financial position.
The report also highlighted broader fiscal risks, including inflation and interest rate pressures not fully reflected in updated expenditure forecasts.
“The FRC notes that interest expenditure projections have not been updated to reflect the changing interest rate outlook,” it stated.
On debt, the Council warned that the Government would need to achieve a net repayment of $1,020.3 million in the second half of the fiscal year to meet its projected debt path, cautioning that shortfalls could lead to higher-than-budgeted debt levels.
It also flagged reliance on short-term financing, noting that treasury bills and Central Bank advances accounted for 54.9 percent of total financing, raising concerns about maturity risk and debt structure.
State-Owned Enterprises were identified as another pressure point, with total subventions projected to rise by 16.4 percent compared to the previous fiscal year, outpacing overall expenditure growth.
The FRC further cautioned that risks to growth remain elevated, including geopolitical tensions, oil price volatility, and weaker-than-expected tourism demand from key source markets.
“The FRC cautions that while the IMF’s revised growth forecast presents a more optimistic outlook, there are downside risks associated with rising oil prices, higher interest rates and persistent global political uncertainties,” the report stated.
It concluded that combined fiscal pressures—including revenue shortfalls, financing risks, and delayed reforms—could impact the Government’s ability to meet its medium-term debt-to-GDP target of 50 percent by FY2030/31.
