NASSAU, The Bahamas – During his Contribution to the Mid-Year Budget Debate 2023, Prime Minister and Minister of Finance the Hon. Philip Davis said in the House of Assembly, on March 1, 2023, at the mid-year point of the first full-year budget crafted by his Government, it continues to advance the nation’s recovery from multiple crises, at the same time as building an economy that will be “more dynamic and more inclusive”.
Prime Minister Davis said: “We have:
· Provided affordable housing: Pinecrest and Carmichael Renaissance are just the beginning.
· Launched a rent-to-own pilot to make home ownership accessible to more Bahamians.
· Introduced a number of additional measures to address the very significant impact of the global inflation crisis in The Bahamas, including raising the minimum wage, reducing or suspending import duties on a broad range of goods, expanding the list of items subject to price control – and now, increasing enforcement of those price controls, with dozens of new price control inspectors.
· Amended the NHI Act to provide for catastrophic health care and amended the Mental Health Act to transform and modernize the way this country deals with the issue of mental health.
Upgraded and continue to upgrade a number of health clinics throughout the country. In fact, we plan to upgrade all 91 of them, and we are finalizing plans to construct 2 new hospitals.
· Installed free WiFi in parks across the country, to ensure wider participation and access to information in this digital age.
· Recruited hundreds of new Police, Defence Force, and Immigration officers.
· Upgraded Family Island infrastructure, including polyclinics, airports, seaports, new roads, seawalls and government complexes. We recently opened a government complex in Bimini and a new passport office in Arthur’s Town, Cat Island.
· Expanded the use of solar power generation, as we pursue broader energy sector reform.
· Opened the Andre Rodgers Stadium, a world class baseball stadium built to Major League standards, highlighting our commitment to “Sports in Paradise” and the orange economy where sports, creative arts and culture will become a significant pillar of the country’s national economy.
· Made historic investments in agriculture — stakeholders in the food production industry now say that 30 years of ‘blowing smoke’ (on farming) is over, and that self-sufficiency in egg production project is now achievable, thanks to the innovative Golden Yoke programme launched earlier this week. This is part of a major emphasis on food security. The pandemic and the global inflation crisis have only underscored the dangers of continuing to import so much of what we eat. I can’t wait to go to the market and see shelf after shelf with Bahamian-grown and produced food.”
“So you see, we did not come here to defend the status quo, we came here to change it,” Prime Minister Davis added.
Turning his attention to Revenue, in Fiscal Performance, Prime Minister Davis pointed out that the Government’s fiscal deficit for the first half of the fiscal year decreased by $5.3 million when compared to the previous year. He added that the deficit totaled $276.0 million for the first six-month of the fiscal year, compared to $281.3 million in the prior year.
“In fact, for the first half of this fiscal year, the primary balance reflected a surplus equating $4.9 million, a major variance from the primary deficit of $41.2 million in the previous year,” Prime Minister Davis noted. “This primary surplus is the first in a very long time.
“When analyzing over 10 years’ worth of data, it is evident that the Government had reoccurring primary deficits each year, for the same time period.”
Prime Minister Davis said that his Government’s revenue performance during the first half of the fiscal year 2022/2023 had improved significantly due to a “vibrant, rebounding economy and strengthened collection efforts”.
“Macroeconomic indicators show persistent demand in the tourism sector with continued growth in visitor activity and occupancy rates in hotels and the home rental market,” he said. “These factors, and revenue policies and administration strategies, have produced results, with total revenue estimated at $1.3 billion for the first six months of the fiscal year.”
“Total revenue has surpassed the prior year by $124.6 million and stands at 44.9 percent of the budget forecast,” Prime Minister Davis added. “Compare that to the first six months of the fiscal year 2018/2019, which can be considered the last ‘normal’ fiscal year, when the total revenue collected during this period accounted for 38.2 percent of the budget forecast.
“This administration’s policies to restore the country’s fiscal health are working – and they are working alongside policies to invest in our people and in our future.”
Prime Minister Davis noted that tax revenue totaled $1.1 billion and strengthened by $130.6 million compared to the prior year, of the same period. Compared to the budget forecast, that represented 44 percent of the collection target,” he added.
“Again, it’s worth comparing that 44 percent to the first six months of the fiscal year 2018/2019 — the last ‘normal’ fiscal year — during which the tax revenue collected accounted for 37.0 percent of the budget forecast,” Prime Minister Davis noted. “There can be no doubt that improved collection of tax liabilities are contributing to these positive results.”
Compared to total tax revenue, Prime Minister Davis noted that Value-Added Tax (VAT) comprised 54.6 percent of the total. For the first six months of the fiscal year, value-added tax totaled $598.8 million, and grew by $54.2 million compared to the prior year, he added.
“To date, VAT accounts for 42.4 percent of the budget forecast,” Prime Minister Davis pointed out. “The value-added tax collections continue to improve despite the reduction in the nominal VAT rate from 12 percent to 10 percent, which meant that VAT was reduced across a very broad range of goods and services.”
“Despite the period-over-period improvement in the VAT collection, the VAT yield has not reached its full potential,” he added. “In fact, I believe that this administration can further increase the VAT yield with more compliance efforts.”
Analyzing historical VAT collections in comparison to the forecast, for the first six months of the fiscal year, revealed that in FY2021/2022 VAT equated 58.8 percent of the budget forecast; in FY2020/2021 VAT equated 43.0 percent of the forecast; and in FY2019/2020 VAT equated 52.9 percent of the forecast, Prime Minister Davis pointed out.
“Thus, although VAT collections to-date increased over the prior year, the collection rate in comparison to the budget, for the first half of this fiscal year, is lower than in the last three fiscal years,” he said. “This same kind of trend was also seen with business license fee collections during the period, in which the actuals under performed in comparison to the budget forecast.”
“However, this Administration continues to tighten the approach of tax collection via targeted compliance efforts that fall under the Government’s overall revenue strategy to enhance revenue collections, as stated it the FSR 2022,” Prime Minister Davis added.
“With further enhancement to tax compliance measures, we are confident that we can boost tax collections by reducing revenue leakages and loss.”
Prime Minister Davis said that taxes on international trade and transactions improved by $88.5 million relative to the previous year and totaled $314.3 million. That equated 61.8 percent of the budget target, he pointed out.
“Most notable under this tax component was an improvement in departure tax collection by $45.0 million compared to the prior year, totaling $71.5 million,” Prime Minister Davis said. “To date, departure tax stands at 73.7 percent of the forecast.
“Also, excise duties grew by $37.4 million to total $119.0 million. At the half-year mark, this accounts for 73.7 percent of the budget forecast.”
Prime Minister Davis noted that, another highlight was property tax collection, which increased to $59.5 million, an improvement of $22.7 million when compared to the prior year. That accounted for 35.1 percent of the budget target, he said.
“Property tax collection at end-December 2022 represents the highest amount collected when compared to collections over the last 9 years, for the same period,” Prime Minister Davis said.
“Based on this trend, property tax collections, by the end of this fiscal year, can have the highest yield seen in a long time.”
Prime Minister Davis stated that non-tax revenue understandably had a modest contraction during the first six months of the fiscal year; as iterated in the mid-year statement, in the prior year, non-tax revenues were inflated due to dividend receipts from BTC, the first in a long time.
“Nevertheless, non-tax revenue totaled $160.6 million during the first half of this fiscal year, and compared to the budget forecast, this accounts for 51.9 percent of the budget target,” he said. “During the period, non-tax revenue improvements were seen in premiums, fees and current claims that increased by $25.2 million.”