Deficit reduced by 31%, but three quarters used
Government revenue for the first six months of this fiscal year increased by nearly 15 per cent compared to the same period in 2017/2018, largely due to increased collection in value-added tax (VAT) and stamp tax, according to the government’s budgetary performance report.
The report, a fiscal snapshot, of the government’s performance, shows that it collected $318 million in VAT in the first six months of the previous fiscal year.
VAT collections increased to $399 million in the same period this fiscal year.
The government projected it will collect over $1 billion in VAT this fiscal year.
The tax was increased from 7.5 per cent to 12 per cent last July, an increase of 60 per cent.
Stamp taxes more than doubled from $54 million in the first six months of 2017/2018 to $114 million in the same period this fiscal year.
In contrast, excise tax collections dropped from $125.8 million to $108.3 million comparatively.
Revenue collections for the first six months was only 38.1 per cent of the annual budget target.
The government has collected $1.01 billion.
Its target for 2018/2019 is $2.65 billion, meaning the government has to collect another $1.64 billion before June to achieve its revenue projections.
“As observed in the opening quarter, the improvement was largely associated with higher receipts of VAT and stamp taxes on financial and realty transactions,” the government said.
“However, the full impact of the VAT at the new 12 per cent rate will not be recorded until the second half of the year, which is also typically a stronger revenue period when several annual fees such as business and banks and trust companies’ licenses, become due.”
Expenditure increased by nearly $50 million period over period, from $1.13 billion in 2017/2018 to $1.18 billion 2018/2019.
This expenditure during the first six months of the fiscal period represents 40 per cent of its expenditure projections for the fiscal year.
That figure is set at $2.88 billion.
Recurrent expenditure increased by $93 million, from just over $1 billion in the first six months in 2017/2018 to $1.09 billion in the first six months of 2018/2019.
This represents a 9.4 per cent increase in recurrent expenditure.
The government said the increase reflects the continued “settlement of budgeted arrears, which aggregated $65.1 million over the period”.
In a statement, Minister of Finance Peter Turnquest said, “It remains important to point out to all Bahamians the tremendous burden that this administration – and by extension the Bahamian people – has to carry when it is forced to pay out $65 million in old bills over a six-month period.
“That said, the good news is that because we are now properly budgeting and managing our expenditure we will get to a point when these old bills are paid off, and the resources can be better utilized to the benefit of the Bahamian people.”
Capital expenditure, however, slowed to the tune of $44 million.
In the first six months of the last fiscal year, capital expenditure stood at $131 million.
In the same period this fiscal year, capital expenditure was $86.9 million.
Of that figure, the government said $55.2 million was a non-recoverable portion of its year-to-date payments towards the settlement of the $100 million Bahamas Resolve Limited promissory note to Bank of The Bahamas Limited.
Additionally, employee compensation was reduced by $27.6 million.
This was attributed to the timing of planned recruitment drives, the government said.
Gaming revenue also dropped from $14.6 million in the first six months of the last fiscal year to $9.8 million in the same period this fiscal year — a result of the delayed introduced of the five per cent patron tax, which is still being negotiated by gaming operators and the government.
The deficit retracted by $79.7 million period-over-period — from $253.9 million compared to $174.2 million.
This represents a 31 per cent reduction.
The GFS deficit for this fiscal year is projected at $237.6 million this fiscal year.
The deficit for the six-month period this fiscal year is nearly three quarters (73.3 per cent) of the projected deficit for the fiscal year.
“We continue to work incredibly hard to achieve one of our core fiscal targets which is to reduce the deficit,” Turnquest said.
“So far, our year on year performance has been positive, and we expect to see that trend continue.
“As I said at the end of the first quarter, we must stay the course.
“We still need to do more work to increase the yield of the current tax base and we anticipate being able to do more when we have completed our internal capacity building.
“The current recruitment of tax auditors and compliance officials in our Department of Inland Revenue is a part of this capacity building exercise and we are excited that this talent will soon be on board.”