NASSAU, BAHAMAS — Acting Prime Minister Peter Turnquest said the Government’s 2018/19 Budget was a watershed budget, as it was guided by the stringent fiscal requirements of the then-pending Fiscal Responsibility Act.
The subsequent Fiscal Strategy Report of November then set the stage for the medium-term framework that will underpin the development of the 2019/20 Budget, the Acting Prime Minister explained while presenting the 2018/19 Mid-Year Budget Statement in the House of Assembly on Wednesday.
“In that framework, we projected that to completely eliminate the deficit from its level of 5.5 per cent of Gross Domestic Product (GDP) in 2016/17 and the debt to GDP ratio eventually from 57 per cent to no more than 50 per cent, we would have a fiscal deficit to GDP ratio of 1.8 per cent this fiscal year, a deficit of 0.8 per cent in the subsequent year, and a surplus of 0.1 per cent in the following year; and corresponding debt to GDP ratios of 56.7 per cent, 55.3 per cent and 53.8 per cent, respectively,” Turnquest said.
He added, “What is more, our framework forecasts a fiscal surplus of $9.4 million in FY2020/21, and $15.1 million in the subsequent fiscal year.”
The Acting Prime Minister explained that in the first six months of the current fiscal year, the fiscal deficit contracted by 31.0 per cent or $78.7 million to $175.3 million, in comparison to the same period in the previous fiscal year.
He added that the outturn for revenue showed a $129.5 million or 14.7 per cent increase in total receipts to $1,010.3 million, representing 38.1 per cent of the budgeted amount.
“We know that historically, revenue collections are typically higher in the second half of the fiscal year, when several annual payments, such as Real Property Tax, Business Licences and Bank and Trust Company Licences are collected.
“Nevertheless, with the timing of VAT payments at the old versus the new rate during the year, as well as the concession granted to hotels in respect of previously booked reservations, we now expect total VAT collections in 2018/19 to be somewhat under the Budget forecast.”
Agreement between Govt., BGOA
The Acting Prime Minister explained that another important development that will impact the revenue outcome is the new agreement between the Government and the Bahamas Gaming House Operators Association.
“At the time of the 2018/19 Budget Communication, a sliding scale gaming tax was announced; effective July 1, 2018, a six-tier scale of tax rates was to apply, ranging from 20 per cent to 50 per cent, depending on the magnitude of each house’s revenue. The then proposed reform also included a 5 per cent stamp tax on deposits and any non-online games or digital sales.
“After extended discussions, the Government and the Gaming House Operators have agreed to a new scale, which, effective January 1, 2019, will tax gaming houses with net taxable revenue from $0 to $24 million at a rate of 15 per cent, and those with net taxable revenue over $24 million at a rate of 17.5 per cent.
He noted that in the new agreement, instead of a stamp tax on deposits, a 5 per cent tax on winnings between $0 and $1,000 will be applied, and on winnings over $1,000, a rate of 7.5 per cent will be applied. As well, all back taxes will be collected before the end of this fiscal year at the previous 11 per cent rate.
The Acting Prime Minister said, “With this new agreement, projected revenues to be collected from the gaming houses will be somewhat below the amounts that had been included in the 2018/18 Budget, in the sum of approximately $18 million.”
He added, “In the Budget we had also projected some $80 million in incremental revenue to be secured by the Revenue Enhancement Unit. As that Unit will now be fully established in the second half of the fiscal year—later than anticipated—we are projecting a dip in the incremental revenue this fiscal year.”
He said it is now estimated that revenues will fall short of the Budget projection by some seven per cent, but still come in some $400 million higher than the last fiscal year.
This article was written by Llonella Gilbert – Bahamas Information Services