Tax receipts up; deficit also increases
Tax receipts for the first three months of the 2016/2017 fiscal year stood at $398.6 million, according to The Central Bank of The Bahamas. Meanwhile, the deficit during the period increased to $86 million, relative to the comparable period last year. The deficit’s increase was attributed to a gain in government spending, which outpaced growth in revenue for that period.
On Monday, international ratings giant Moody’s increased its 2016/2017 fiscal deficit projection for The Bahamas to 3.6 percent of gross domestic product (GDP) in light of Hurricane Matthew.
Parallel to this, The Central Bank of The Bahamas’ (CBOB) Monthly Economic and Financial Developments (MEFD) report for October, published yesterday, said expectations are that the Category 4 storm will lead to “further deterioration of the deficit” over the near term. In addition, the revenue performance is expected to be “impacted by the effect of the tax relief extended to support the rebuilding efforts”.
The report noted, “Data on the government’s budgetary operations for the first three months of fiscal year 2016/17 showed a $23 million (36.6 percent) worsening in the deficit, to $86 million, relative to the comparable period last year. This outturn reflected a $35.8 million (7.2 percent) expansion in spending, which outstripped the modest $12.8 million (2.9 percent) rise in revenue.”
The central bank stated that underpinning the expansion in expenditure was an increase in capital outlays, which “climbed by $25.5 million (64.2 percent) to $65.1 million”.
The capital outlays included a rise in “spending for road works and a costal protection project which contributed to a $19.3 million (63.3 percent) increase in capital formation”.
“Similarly, the acquisition of assets rose by $6.1 million (67.1 percent), owing to a three-fold increase in investments in ‘other’ assets to $12.8 million — reflecting the purchase of additional defense force vessels—which eclipsed the $3.2 million (62.2 percent) reduction in land investments, following a property purchase last year,” CBOB noted.
The report pointed out that current spending firmed by $10.3 million (2.2 percent) to $471.2 million, due mainly to an $11.8 million (five percent) gain in transfer payments.
“This outcome reflected growth in transfers to both public corporations and non-profit institutions by $15.6 million and $6.1 million to $31.2 million and $24.1 million respectively, which overshadowed the $18.1 million timing-related falloff in subsidies — mainly to the Ministry of Tourism — to $74.9 million,” said the bank.
On the revenue side, the report said that tax receipts — which comprised 88.5 percent of total inflows — firmed by $6.3 million (1.6 percent) to $398.6 million.
However, value-added tax (VAT) receipts fell by $5.2 million to $160.3 million.
The increase in tax receipts was said to be a reflection of “increases in several revenue categories”.
In a breakdown the report stated: “Specifically, taxes on international trade rose by $5.8 million (4.5 percent) to $133.1 million, led by broad-based gains in excise, import and export taxes by $2.8 million, $1.5 million and $1.4 million, respectively. Further, selective taxes on services firmed to $3.2 million from $0.1 million — solely on account of inflows from gaming taxes, which were absent in the prior period. Similarly, business and professional fees advanced by $3.4 million (59 percent), due to timing-related increases in general business fees.”
The report added, “In contrast, timing-related factors led to value-added tax (VAT) receipts falling by $5.2 million (3.2 percent) to $160.3 million, while ‘other’ miscellaneous taxes narrowed by $3 million (3.1 percent) to $92.7 million, as a reduction in other ‘unclassified’ taxes by one half to $11.7 million, eclipsed the increases in departure and ‘other financial stamp’ taxes by $7.7 million and $4 million, respectively.”