By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $271.1 million in gross Value-Added Tax (VAT) revenues collected during the first five months of the Government’s 2015-2016 fiscal year slashed its fiscal deficit by almost 50 per cent to $134.1 million.

The Central Bank of the Bahamas, in its monthly report on December 2015’s economic developments, said VAT had driven a $209.2 million or near-40 per cent expansion in government revenues to $735.5 million for the five months to end-November.

“The Government’s overall deficit was approximately halved to $134.1 million during the first five months of fiscal year 2015-2016,” the Central Bank said.

It added that the revenue rise had helped to counter the $64.9 million (8.1 per cent) increase in total government spending to $869.6 million.

While the Government can derive some comfort from the fiscal progress made to-date, largely as a result of VAT’s implementation, it is continuing to incur ‘red ink’. And the $134.1 million deficit to end-November is just under the roughly $140 million it expects to incur for the 2015-2016 full year.

It is unclear whether the figures were impacted by Hurricane Joaquin, but the Central Bank indicates there is still much work for the Government to do - especially in containing, then reducing, government spending.

“Tax revenue rose by $202.3 million (44.7 per cent) to $655.1 million, with VAT revenue totalling $271.4 million,” the Central Bank said of the five months to end-November.

“Tariff rate reductions in the context of VAT resulted in decreased collections on international trade and transactions by 13.6 per cent to $216.9 million, with both import duties and Excise taxes lower by $17.6 million (13.6 per cent) and $9 million (8.3 per cent), respectively.

“Further, selective taxes on services fell by $7.4 million to $10.2 million, as the reform eliminated hotel occupancy taxes of $15.2 million. However, the initial licensing fees from the legalisation of web shop gambling raised gaming revenues by $7.8 million.”

Real estate taxes also shifted to VAT, with Stamp Taxes reduced by $29.5 million (69.7 per cent). The Government’s non-tax inflows also rose by 13.9 per cent to $80.3 million, supported by dividend payments from the Bahamas Telecommunications Company (BTC).

The data illustrates how the Government’s net revenue growth is going to be less than VAT’s gross intake. A collective $71.6 million in other taxes have either been eliminated or foregone as a result of the new tax’s implementation.

Meanwhile, the Central Bank said spending growth also included changes that now recognise subsidies to public corporations as direct budgetary (recurrent) assistance, rather than capital transfers and loans.

“Current payments rose by 15.1 per cent to $794 million, due mainly to a $77.2 million (24.4 per cent) expansion in transfer payments to $393.8 million,” it said.

“This captured significant outlays classified last year as net lending to public corporations ($33.4 million). In addition, increased incentives and support for tourism activities elevated subsidies by $20.3 million (15.9 per cent) to $148.1 million.

“In addition, government consumption expenditure increased by 7.3 per cent to $400.2 million, amid higher spending on goods and services by $16.6 million (15.9 per cent) and wages and salaries by $10.4 million (3.9 per cent).

“However capital expenditure contracted by 7.5 per cent to $73.6 million, as the $14.2 million (74.4 per cent) reduction in the ‘other’ asset purchases overshadowed the $4.5 million increase in land acquisitions.”