By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

A Cabinet minister yesterday said the fact the Government is “right on target” to meet the current fiscal year’s $69.8m goal gives it confidence it can generate the forecast Budget surplus for 2025-2026.

Michael Halkitis, minister of economic affairs, said that while the Government engaged in major capital spending during the first half of the current 2024-2025 fiscal year it had always been confident revenue collections during the final six months would bring it back into line with Budget forecasts.

“We’ve been running surpluses in the second half of the year, which is what we explained when the statistics were released for the mid-year, when there was a lot of commentary about the Government busting it’s full-year Budget,” said Mr Halkitis.

“We explained at the time that the reason that the deficit was larger at the half-time, at the mid-year, was because of spending brought forward earlier in the fiscal year, and the fact that every year the Government realises more of its revenue in the second half.

“And we made the point that what we need to do is look at the full year. We are seeing that come to fruition. We are well on target to meet our projection. And we are confident in that, which gives us confidence in our projection for a surplus for next year.”

Mr Halkitis said the surplus forecast is “due to a number of elements”, including controlling spending, projected economic growth, improved revenue collections and new sources of revenue such as the new 15 percent Domestic Minimum Top-Up Tax (corporate income tax on companies part of multinational groups with 750m euros or more in annual turnover).

“This surplus that we are projecting is a result of growth in the economy. We’ve seen the economy grow very, very strongly coming out of the COVID pandemic. It has since moderated. But last year, 2024, we see the Bahamas National Statistical Institute confirm that the growth rate of the economy was 3.4 percent, well ahead of what had been forecasted by the IMF and other agencies. So we have got one element; the economy is growing,” said Mr Halkitis.

“Second element, improved revenue administration, closing loopholes, doing a better job of collection, and we’re seeing the result of that expenditure control - by and large, successful - and then new sources of revenue, the Domestic Minimum Top-Up Tax that we forecast to begin collecting during this budget period. And that plays a crucial element.

“And so all of those working together has put us in this position where we are..... we’ve recovered very nicely. We are able to forecast the surplus, and now the job is to ensure that we continue the work and we actually realise it.”

During the 2025/2026 Budget communication, Prime Minister Philip Davis KC unveiled VAT reductions and Customs duty exemptions on a range of essential items. The Opposition criticised the rate reductions as not going far enough, but Mr Halkitis said the Davis administration’s VAT reductions are “much more beneficial” to the public.

He explained that under the former Minnis administration a number of items were made duty-free, but the exemption was coupled with a 4.5 percent VAT rate increase.

“I’ll just remind the public that on coming to office, this administration moved quickly to cut the overall VAT rate from 12 percent to 10 percent, and then it went further in this last mid-year Budget to reduce VAT on all food items, all food sold in the food store or convenience stores, from 10 percent to 5 percent,” said Mr Halkitis.

“Just recall that when the previous administration, back in 2018, implemented their system of exemptions they increased the VAT rate from 7.5 percent to 12 percent, and so it’s an argument that they continue to make.

“But I would just say to the public that we have been in tax reduction mode since we came to office, from 12 percent to 10 percent, and now from 10 percent to 5 percent on food items and some additional items in this Budget cycle,” he added.

“And we are confident that our reductions, when you compare it to their scheme of raising the overall VAT, but reducing it or eliminating it on about 20 or 30 items, our programme of across-the-board reductions is much more beneficial to the Bahamian public.”