The government’s revenue projection for the 2018/2019 fiscal period is now forecasted to fall short by $185 million, Minister of Finance Peter Turnquest revealed yesterday.
Turnquest said this is due in part to the renegotiated tax scale for gaming houses, lower than expected value-added tax (VAT) collections and the delay in the formation of the Revenue Enhancement Unit, which was forecasted to collect some $80 million in incremental revenue.
In the 2018/2019 budget, the government forecasted revenue of approximately $2,650,927,483.
“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 licenses and Bank and Trust Company licenses are collected,” said Turnquest as he presented the mid-year budget statement.
“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 2018/2019 to be somewhat under the budgeted forecast.
“Another important development that will impact the revenue outcome is the new agreement between the government and the Bahamas Gaming House Operators Association.”
During the budget communication last May, the government announced a sliding scale tax on gaming house revenues and a five percent stamp tax on deposits.
Legal action forced the government to abandon this tax structure.
Turnquest noted yesterday that after extended discussions, the parties agreed to a new scale which will tax gaming houses with net taxable revenue from $0 to $24 million at a rate of 15 percent, and those with net taxable revenue over $24 million at a rate of 17.5 percent.
Additionally, a five percent tax on winnings up to $1,000 and a 7.5 percent tax on winnings over $1,000 will be implemented.
All back taxes at the previous 11 percent rate are expected to be collected before the end of this fiscal year.
Turnquest 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 2018/2019 budget, in the sum of approximately $18 million.”
As it relates to the Revenue Enhancement Unit, Turnquest said that won’t be established until the second half of the fiscal year.
“All told, we now estimate that revenues will fall short of the budget projection by some seven percent, but still come in some $400 million higher than the last fiscal year,” he added.
Turnquest noted yesterday that in the first six months of the current fiscal year, the fiscal deficit contracted by 31 percent or $78.7 million to $175.3 million, in comparison to the same period in the previous fiscal year.
“I repeat; we saw a near $80 million reduction year-on-year in the deficit at the midpoint of the year.”
The finance minister also explained that both recurrent and capital expenditure will come in somewhat lower than had been projected in the 2018/2019 budget, due to expenditure trends in the first half of the fiscal year.
“Expenditure outcomes for the first half of FY2018/2019 showed a $50.9 million or 4.5 percent increase in spending to $1,185.6 million, with recurrent outlays higher by $94.9 million or 9.5 percent to $1,098.6 million,” Turnquest said.
“Yet, total expenditure and recurrent expenditure were both below the budgeted halfway mark, at 41 percent and 42.4 percent, respectively.
“Under recurrent expenditure, compensation of employees — which covers spending on wages and related personnel costs — was reduced by $27.5 million or 7.4 percent to $345.8 million, and was only 43.6 percent of the budgeted amount.
“Primary expenditure grew by $31.7 million or 3.2 percent to $1,024.7 million.
“In contrast, capital expenditure fell by $44 million or 33.6 percent over the six-month period, to $86.9 million.”
Turnquest said arrears payments contributed to the overall increase in expenditure. He noted that of the $172 million in arrears the government has committed to pay this fiscal year, $65.1 million has already been paid.
“With the fiscal outturn in the first half and projected developments in the second half, we now foresee a fiscal deficit in 2018/2019 slightly under the budget forecast, by some $5 million to $10 million,” he added.
“Thus, we project presently a budget deficit of somewhere near $230 million, which means we remain firmly on target.”