It is estimated that the fiscal measures just announced will further dampen the deficit . . . . On the cash basis the measures are expected to result in a deficit of 5.8 per cent down from the current projection of 7.9 per cent. – Minister of Finance Chris Sinckler, Budget Speech, August 2016
WELL, LUCKY FOR the Finance Minister, he seems to have gotten it down to 5.1 per cent. But nearly one per cent of that reduction appears to have come from revenue associated with the sale (pending or not) of the Barbados National Terminal Co. Ltd.
Put another way, had it not been for that extra revenue of $82 million, the deficit would be closer to six per cent for the year. Here’s my brief summary of how I came to that conclusion:
The Government of Barbados’ revised estimates for the financial year now ending, 2016-2017, show that total revenue flowing into the Treasury was higher than the amount estimated by $126 million, for a total of $2 887 million, that is, close to $2.9 billion.
The increased revenue, however, did not come from where you might have expected, that is, the new health levy or the bank asset tax, but from $82 million booked through the sale of assets, presumably a part of the proceeds pending from the sale of the BNTCL, as well as profits from an unspecified entity.
The Government also booked gains from a revaluation of its special drawing rights with the International Monetary Fund and massive increase in excise duties ($63m). Receipts from corporate profits (up $17m), land taxes (up $2.3m), import duties (up $11m) and withholding taxes (up $24m) were also up by modest amounts.
The national social responsibility levy, including its effect on increasing the VAT, was expected to reap around $142 million in a full year, and for the remaining six months of the 2016-2017 fiscal year around $83 million, Sinckler said last August.
However, according to the Estimates publication, under cection “510. Special Receipts”, the amount received from “levies” was up only $22 million for the year, to $48 million, while the revised estimate for VAT was actually shown at $14 million below the total for the original Estimates, at $1 332 million.
As for the bank asset tax, the Finance Minister said the rate would be increased from 0.2 per cent to 0.35 per cent, backdated to April 2016, and would bring in $33.3 million in a full year. However, the revised estimate for this tax, shown under section “501. Goods and Services”, was $22 million, just $2 million above the original estimate.
So, of all the regular taxes, direct and indirect, the biggest gains for the year (revised versus original estimates) seem to have come from VAT (about $90m) and excise taxes (about $66m).
However, outside of taxes, under section “550. Other Revenue – Non-Tax”, the line “Gains from Sale of Fixed Assets” shows a sum of $75 million as a revised estimate, up from an estimate of zero. (Another $100 million has been put into the estimate for the coming financial year.)
On top of that, it is showing an amount of $7 million as a revised estimate, up from zero, for the line “Share of Profits”, with a similar amount estimated for the coming year. The line “Dividend Income BNOC”, shown as zero this year, is also expected to yield $10 million in the new financial year.
The Government, it seems, is now more dependent than ever on selling off assets to shore up its current, not capital, account. That is, selling off fixed assets for short-term gain.
Patrick Hoyos is a journalist and publisher specialising in business. Email: [email protected]
