Analysts to govt: Don’t depend on one-off transactions
While one-off unexpected government revenue experienced a surge over the last month, with$120.6 million in financial transactions being recorded, it shouldn’t be depended on as a revenue source, according to a pair of financial analysts.
“If they can’t produce better revenue numbers than this after all those massive taxes, where are they going to get the revenue from next time?”retired banker Al Jarrett toldGuardian Businessyesterday.”One-offs are a joke.”
Jarrett’s comments came after Prime Minister Hubert Ingraham gave his mid-year budget statement in the House of Assembly on Wednesday, where he outlined the government’s progress during the first six months of the 2010-2011 fiscal year. According to the revenue performance table in the report, the government is$84.2 million behind its projected total revenue forecast for the six months from July to December 2010.
Ingraham said that one-off unexpected revenue has been generated over the recent years, and this is expected it to be the case going forward.
“It has typically been the case in recent times that one-off unexpected revenue items have surfaced during the course of each fiscal year,”Ingraham said.”That was the case last year, to the tune of$84 million in the first half of the fiscal year. This year will be no different.”
Recent one-off transactions during the past month totaled$120.6 million, with$78.9 million coming from the sale of the Bahamas Oil Refining Company(BORCO)and$37.4 million from Baha Mar stamp tax and gaming tax payments.
President and CEO of Providence Advisors Kenwood Kerr said opportunities of that scale may not always be available for the government
“The one-offs are just that, it’s a situation that just arises,”Kerr told Guardian Business yesterday.”The problem is while it is good they are surprises. So in this case the recent sales are one-offs that work positively for us. But going forward assuming that one-offs are not always there, other strategies must come into play.”
Revenue from one-off items will contribute to minimizing the debt-to-GDP ratio, which was predicted to be under 49.2 percent in the 2010-2011 budget communication. According to the prime minister, government debt at the end of December 2010 stood at 48.7 percent of GDP(gross domestic product).
For the first six months of the current fiscal year, revenue was$34 million excluding the$84 million in one-off receipts. Revenue was down in the range of$50 million in the 2009-2010 fiscal year, totaling$584.1 million.
Jarrett offered suggestions on how to reduce debt and increase revenue in the country.
“Reduce the prime rate, let the business sector hire some people and let the middle class get a little break, and allow the business sector to thrive and create the necessary jobs we need,”he said.”The government was taxing the Bahamian people last year. The massive tax budget last year that created pain, caused the business sector to shrink their books and lay off people and caused great misery to the middle class people and their purchasing power.”