FULL Statement by Minister of Finance Chris Sinckler Part 3/4
Part three of the Ministerial Statement delivered by Minister of Finance Chris Sinckler.
Comparative Monthly Analysis for September
Preliminary information received from the Accountant General indicates that current revenue collected for the month of September 2013 is $211.0 million compared to $179.8 million in September 2012.
Taxes on goods and services decreased by $1.9 million to an amount of $89.2 million for September 2013 when compared with the amount collected in September 2012. VAT collected for the month of September 2013 was $65.7 million, an amount of $2.5 million less than that collected in September 2012.
Taxes on incomes and profits increased by $16.5 million over the amount collected in September 2012 to an amount of $48.7 million. This can be attributed to an increase in income taxes of $20.5 million when compared to September 2012.
Taxes on property increased by $16.9 million over the corresponding period in 2012 to $51.4 million. This can be attributed to an increase of $16.6 million in land tax. Special Receipts increased by 2.6 million due to an increase of $2.0 million in the amount collected for the training levy.
Current expenditure, inclusive of amortization of $14.5 million, increased by $6.4 million moving from $223.8 million in September 2012 to $234.7 million in September 2013. Total expenditure increased by $5.3 million.
Comparative Monthly Analysis for October
Preliminary information received from the Accountant General indicates that current revenue collected for the month of October 2013 is $160.5 million, the same as October 2012.
Taxes on goods and services decreased by $5.1 million to an amount of $88.6 million for October 2013 when compared with the amount collected in October 2012. Excise taxes collected for the month of October 2013 was $9.6 million, an amount of $2.4 million less than that collected in October 2012. An amount of $72.2 million was collected in VAT receipts. This is $0.7 million less than that collected in October 2012.
Taxes on incomes and profits increased by $9.5 million over the amount collected in October 2012 to an amount of $35.5 million. This can be attributed to an increase in income taxes of $8.0 million when compared to October 2012. In addition, an amount of $1.8 million was collected for Consolidation Tax.
Taxes on property decreased by $3.5 million from that collected in the corresponding period in 2012 to $7.9 million. This can be attributed to a decrease of $4.5 million in land tax whereas there was an increase of $1.0 million in property transfer tax. Special Receipts increased by $0.6 million due to an increase of $0.5 million in the amount collected for the training levy.
Current expenditure, inclusive of amortization of $171.1 million increased by $122.9 million, moving from $280.3 million in October 2012 to $403.2 million in October 2013. Total expenditure increased by $126.5 million.
The deficit of $511.1 million represents 6.0% of GDP at market prices of $8,458.1 million. The deficit for the corresponding period in 2012 was $378.2 million representing 4.5% of GDP at market prices of $8,449.7 million.
On the current trajectory, with the revenue declining at the rate that it currently is and with reductions in expenditure not being experienced at a similar rate, the projected deficit to the end of the financial year 2013-2014 would likely be above last year’s.
Based on this situation and given the projections which we have for major supplementaries for the QEH (Queen Elizabeth Hospital), UWI (University of the West Indies) and Transport Board, it means that we would not be able to meet our targets for 2013-14 and would in fact be worse off than 2012-13.
It would mean that government would have to continue borrowing heavily in the domestic capital market including from the Central Bank to make up the financing gap at the risk of further hemorrhaging of the country’s reserves, which by the end of October were just under $900 million dollars.
More importantly, should this situation be allowed to continue unchecked, it will undermine the macro fundamentals that support our firm and unshakable policy of maintaining a fixed exchange peg with the United States dollar.
I believe Mr Speaker that there is a strong enough national consensus that we must do all in our power to avoid such a situation from occurring. This administration will not recoil from that mandate.
At the beginning of this recession Sir, this administration gave a commitment to our Social Partners that as long as it was feasible to do so, government would retain a policy of no layoffs in the public service. The private sector agreed to do likewise. We as partners agreed that if the situation merited such action that government or the private employer would commit to notification and consultations with the Partners so as to ensure that such an exercise would be undertaken in a fair and orderly fashion as to contain the expected levels of dislocation. The private sector has been doing this.
For the past five years the government has remained faithful to its pledge to maintain public sector employment, and has in some respects even increased levels in some areas to assist Barbadians in coping with the ravages of the economic downturn.
Over the same period, and in this regard, the weight of economic adjustment has fallen disproportionately on the private sector as local businesses have had to right size their operations to remain viable in very challenging times.
They have had also to carry the burden of inconsistent and delayed payments from government as cash flow problems, not unknown to most governments, have been more acute during the crisis.
In all of this government has done its utmost not only to maintain the social safety net, but also in some areas to expand it through such measures as free bus rides for school age children, accelerated increases in the reverse tax credit, lowering of the income tax rates and extension of weeks for displaced workers to claim unemployment benefits, to name a few.
All of these were designed to cushion the impact of the recession on ordinary Barbadians in the hope and expectation that we would have a shortened recessionary period as per the normal trend with global and national recessions.
As it turns out the challenge has continued longer that anyone could have predicted and the wear and tear on our fiscal situation is clearly evident and manifesting its ill-effects in other more critical areas of our economic structures.
In September this year the Prime Minister in his capacity as Head of Government and Minister responsible for the Civil Service, and in pursuance of the implementation of Budget measures, ordered all Permanent Secretaries to examine the areas at which the measures were targeted and to report how fully these could be implemented.
The results are as I have already announced. More pointedly, the reality is that, despite our very best efforts to avoid having to adjust staff levels in order to achieve our fiscal consolidation objectives, this route is now simply unavoidable.
On current trend Mr Speaker, it is expected that for this 2013-14 financial year, government is expected to expend $1 286.2 million on wages and salaries across both central government and statutory corporations which rely on the State for budget support. This compares with total projected debt service expenditure of $1n431.1 million from a projected total expenditure budget of $3 845.5 million.
Of course Sir, we know that to some significant extent the large deficits which we have had to carry have in themselves been a key driver of the growing debt service as government has had to borrow more heavily to finance these large deficits.
Over the period of the economic downturn, our efforts at fiscal consolidation have been heavily tilted towards cuts in outlays for goods and services and selected increases in taxation. Little headway has been made in cutting subsidies and transfers given the deep structural make up of these. Our first major effort at addressing either this or expenditures on wages and salaries is contained in the August measures.
And since we are now of the opinion, based on the trend in the fiscal accounts over the first seven months of the financial year, that additional effort will be required to keep us on track with our end-of-adjustment-period targets, these are the areas in which I now propose complementary and additional measures.