NASSAU, BAHAMAS- The government’s revenue intake for the first half of the 2024/2025 fiscal year stands as the highest revenue level this country has ever experienced for this period, according to Prime Minister Philip Davis.
In his mid-year budget communication, the Prime Minister noted that, for the first six months, preliminary total revenue collections are estimated at $1.4 billion, reflecting a $138.9 million increase compared to the same period last year. So far, revenue collections have accounted for 40.7 percent of the annual budget target. When compared to FY2018/19, the last normal year before the twin disasters, total revenue for the first half of the year has grown by 42.4 percent, or $429.3 million. This was achieved without any appreciable increase in taxes since this administration came into office.
“This achievement can be attributed to several key factors, including more rigorous enforcement measures and a significant improvement in compliance, particularly in respect of real property taxes. As well, we have seen an increase in revenue yields from new policy measures, notably in respect of business license fees and departure taxes. The combination of these efforts has led to enhanced revenue collections, reflecting this administration’s push towards fiscal consolidation. The fiscal landscape of the nation is showing promising signs of sustainability, paving the way for further investments in public services and infrastructure as well as meeting our revenue and overall fiscal objectives,” said Prime Minister Davis.
The Prime Minister also noted that tax revenue collections expanded by $122.1 million and stood at $1.3 billion for the first six months of the fiscal year. This represents 41.1 percent of the budget target. Value-added tax collections accounted for 51.3 percent of tax revenues, totaling $663.1 million at the half-year mark. This represents growth of $17.1 million relative to the same period in the previous year and equates to 43.7 percent of the annual budget target. Davis pointed out that, although his administration reduced the VAT rate from 12 percent to 10 percent in January 2022, the strength of the Bahamian economy and notable enhancements in the government’s collection efforts have resulted in increased VAT revenues.
“In comparison to the fiscal year 2018/2019, when the VAT rate was 12.0 percent, the half-year VAT collections for this current year have risen by 72.1 percent, amounting to an increase of $277.8 million. This positive outcome happened despite recommendations from the IMF to raise the VAT rate to 15 percent in line with regional counterparts. Our unwavering commitment to improving VAT administration has contributed to these encouraging results. I am pleased to confirm that this administration will reduce the VAT rate on unprepared food, which I will discuss in greater detail later in this Communication,” said Davis.
He further noted that departure tax collections doubled, totaling $169.6 million, representing a rise of $84.8 million compared to the previous year. At the half-year mark, departure tax collections accounted for 70.3 percent of the budget target. Davis noted that this tax is expected to exceed its budget target based on tourism results.
Property taxes amounted to $68.6 million after expanding by $21.4 million relative to the previous year, which equates to 29.8 percent of the budget target. Davis indicated that the majority of property taxes are collected or due in the second half of the fiscal year, so the government expects this number to increase.
Special licenses for conducting business activity saw a $12.1 million expansion, totaling $37.2 million, thanks to gains in the business license component, which grew by $9.0 million compared to the previous year. In the non-tax revenue component, collections for fees and service charges, mainly for immigration and customs fees, increased by $10.4 million to $123.3 million, accounting for 51.4 percent of the budget target. Additionally, government property income rose by $13.2 million, totaling $14.4 million, which met 78.6 percent of its budget target.
On the expenditure front, preliminary total expenditure was $1.8 billion in the first half, an increase of $278.3 million over the previous year. To date, total expenditure has represented 50.9 percent of the annual budget target, in line with the budget estimate. Preliminary recurrent expenditure for the period made up 49.5 percent of the budget target and amounted to $1.6 billion, with recurrent spending increasing by $192.3 million year-over-year.
Key spending components during the period included an increase in compensation of employees by $16.9 million, bringing the total to $434.6 million, representing 48.9 percent of the budget target. Increased spending in this component is due to higher employment costs resulting from promotions and other staff and salary adjustments during the period. Spending on goods and services increased by $94.8 million to $346.6 million, accounting for 50.4 percent of the annual budget target. This increase was driven by payments for rent, utilities, acquisition of services, and special financial transactions.
Public debt interest payments were higher by $34.3 million, totaling $335.5 million, which represented 51.1 percent of the budget target. It is anticipated that interest payments will decrease during the second half of the fiscal year due to the successful launch of the debt conversion project for marine conservation.
Subventions to public non-financial corporations drove the $16.6 million year-over-year increase in subsidies, totaling $220.4 million and accounting for 53.5 percent of the budget target. Furthermore, other recurrent transfers increased by $31.3 million to $132.9 million due to higher transfers to non-financial public corporations. At the half-year mark, recurrent transfers accounted for 47.4 percent of the budget target.
Capital expenditure for the first half of the fiscal year totaled $220.1 million, an $86.0 million increase over the same period in the previous year, and accounted for 63.9 percent of the annual budget target. As a result of net borrowing activities, central government debt increased by $451.1 million to $11.7 billion, which equated to 79.2 percent of GDP at the end of December 2024. This marked a significant improvement compared to the 100.4 percent debt-to-GDP ratio at the end of June 2021.
