The government collected just shy of $200 million in value-added tax (VAT) in the first quarter of this fiscal year, according to the government’s budgetary performance paper released today.
In the “First Quarter Snapshot on Budgetary Performance” compiled by the Ministry of Finance, the document said between July and September 2017, the government collected $167.4 million in VAT.
It collected $199.4 million in VAT in the same period this fiscal year, an increase of $32 million or 19.1 percent.
The government increased VAT from 7.5 percent to 12 percent on July 1.
The tax accounts for 42 percent of all tax revenue.
The report said, however, the figures do not reflect the full impact of the VAT rate hike.
“Some tempering factors included the government’s accommodation to hotels and resorts and development projects to honor business booked/secured prior to September 30, 2018, at the old rate; and the first quarterly filing at the new rate being in October,” the report notes.
Overall, revenue in the first quarter of 2018/2019 increased by $60.1 million compared to the first quarter of 2017/2018, a direct result of increased taxes to the tune of $57.5 million.
This was primarily due to the increase in VAT collections, stamp tax and trade taxes, the document shows.
Revenue collected from stamp tax increased by around 90 percent – from $30.8 million in Q1 of 2017/2018 to $58.4 million in Q1 of 2018/2019.
Trade taxes also increased from $105.4 million in the first three months of the last fiscal year to $113.8 million in the first quarter of this fiscal year.
This represents an $8.4 million increase quarter-over-quarter.
First quarter business licenses revenue decreased, however – from $13.6 million to $4.4 million, a more than 67 percent drop-off.
The report said this was primarily the result of “timing related factors in the receipt of payments”.
Collections of taxes, including property, excise taxes, motor vehicle and ‘other’ remained relatively unchanged.
On the expenditure side, overall expenditure increased by $3.5 million, accounted for by a $39.1 million increase in recurrent expenditure and a $35.6 million decrease in capital expenditure.
Government expenditure totaled $565.8 million in the first quarter of this fiscal year.
“Developments included a $39.1 million upturn in current outlays to $527.1 million, primarily associated with the settlement of $39.5 million in payment arrears,” the report states.
“In a significant offset, capital expenditures declined by $35.6 million to $38.7 million, following last year’s extraordinary boost linked to the government’s settlement of the initial $50 million of Bahamas Resolve Limited’s $100 million promissory note.
“As 80 percent of this amount was considered non-recoverable, $40 million was expensed and the balance recorded as the government’s acquisition of a financial asset in Bahamas Resolve Limited.”
“The most significant increase came from payments to settle a portion of the government’s budgeted arrears,” the report said.
“During FY17/18, there was an extraordinary booking of $40 million to capital expenditure that inflated the prior Q1 figure.
“There was no recurrence of this one time write-down related to the Resolve Asset Holdings.”
The government spent an additional $35.1 million for good and services in the first quarter of this fiscal year compared to the same period in the previous fiscal year – $85 million compared to $120.1 million.
According to the document, the “significant increase in good and services came from the payment of budgeted arrears”.
Employee compensation lowered by $20 million, from $191.9 million to $171.9 million.
Meanwhile, subventions to government entities providing commercial goods and services increased by $10.4 million – from $60.3 million to $70.7 million.
Capital expenditure for the period totaled $38.7 million this fiscal year. In Q1 of 2017/2018 capital expenditure stood at $74.3 million.
According to the report, the government’s net acquisition of financial assets totaled $45.7 million for the period, $37.5 million of which went into the purchase of the Grand Lucayan resort in Freeport, Grand Bahama.
“The major investments were $6.6 million into the sinking fund, which sets aside money to pay off the principal on existing long term debt, and the investment of $37.5 million into Lucayan Renewal Holdings Limited to purchase and temporarily hold the Our Lucayan Properties,” the report states.
The government is purchasing the property for $65 million with $30 million paid up front. The additional $7.5 million transferred to the government’s special purchase vehicle was for “other related payments” for the acquisition.
As part of the sales agreement the government agreed to cover the operational losses for the previous owner to keep the Lighthouse Point open during the sales process.
The Bahamas’ estimated debt as of September 2018 was $7.3 billion, according to the report.
“Government funded its budgetary operations through $280 million in new borrowings,” it read.
“Utilizing the FY2018/2019 borrowing resolution, which makes provision for the government to raise $187.7 million for deficit financing, together with amounts required to refinance the maturing debt budgeted at $709.4 million, the government secured a $100 million Bahamian dollar loan from a local bank, and issued bonds totaling $110 million.
“There was also recourse to short-term financing by way of Treasury bill issuances, aggregating $70 million.
“As a consequence of the net borrowing activities, the direct charge on the government increased by an estimated $136.5 million to $7.382 billion at end-September, 2018.”
The report notes that net borrowing decreased by 42 percent when comparing the two quarters – from $488.5 million in Q1 of 2017/2018 to $280 million in Q1 of 2018/2019.
The government also increased its debt repayment by nearly $34 million or 24 percent.
In the first quarter of 2018/2019, debt repayment totaled $143.5 million.
Debt repayment in Q1 of 2017/2018 was $109.6 million.
This means that the government net liability stood at $136.5 million by the end of the first quarter, a decrease of 65 percent of the net liability of $378.9 million after the first quarter of the last fiscal year.
The budgetary data was prepared using a modified cash basis of accounting and guided by International Public Sector Accounting Standards cash basis, according to the report.