Wed | Apr 26, 2017

Tax revenue targets missed for seven years, Government concedes

Published:Wednesday | March 11, 2015 | 3:00 AMMcPherse Thompson
Auditor General Pamela Monroe Ellis

The Ministry of Finance and Planning has admitted that tax revenue targets have not been achieved in the last seven years, but said the variances relative to budget have declined significantly and since fiscal year 2011-12 have fallen consistently.

For fiscal year 2014-15, the variance is projected to be 1.7 per cent compared with 7.1 per cent in 2008-09, the ministry said, in response to observations by Auditor General Pamela Monroe Ellis in her review of the 2015-16 Fiscal Policy Paper (FPP) tabled in Parliament in February.

The ministry said it recognises the efforts of the Auditor General's Department in undertaking and completing its review of the Fiscal Policy Paper and related documents, in line with statutory requirements.

It added that the final report of the Auditor General's Department, dated March 3, 2015, documents several responses by the ministry to issues raised, but said additional commentary on the final report is warranted.

The ministry said the Auditor General's Department provides commentary on the deviations of actual tax revenues relative to budget, and notes that "tax revenue targets have not been achieved in the last seven years".

It said that "while this is a factual statement, the report fails to acknowledge ... that the variances of actual tax revenues relative to budget have declined significantly, and, since 2011-12, have declined consistently" and was projected to decline further.

"Further, while the variance of tax revenues, in total and for specific components, is analysed in detail, the performance of expenditures, except for wages, is not assessed similarly," the ministry said.

In the context of comments that "expenditure ... be managed in line with revenue so as to achieve the desired fiscal outcome", it said expenditure management is an equally powerful tool.

In particular, the ministry notes that expenditure adjustments have facilitated the attainment of primary balance and debt targets, and have done so while accommodating sometimes unforeseen additional expenditure commitments.

In her observations, Monroe Ellis said the law requires that the Auditor General reviews and reports on the Fiscal Policy Paper two weeks after it is tabled in the Houses of Parliament.

timely communication

She said that requirement makes it necessary that there is robust collaboration and a communication mechanism between the Ministry of Finance and the Auditor General to facilitate the timely, proper and complete review of the paper.

The reduction in the legislative timeline was expected to be facilitated by the provision of additional resources to the Auditor General's Department, she said.

"Unfortunately, the approval to facilitate the engagement of the requisite skill set and competence was not provided within a timeframe to permit availability of staff for involvement in the audit process," Monroe Ellis said.

"This has had a significant impact on the depth of the review of the FPP and all related documents within the legislative timeframe of two weeks," she added.

In its response, the ministry said the Estimates of Expenditure for fiscal year 2014-15 allocated financial resources necessary to support acquisition of relevant skills.

However, despite several consultations on the level appropriate for the execution of the functions, the requisite approval was provided much later than originally intended, thereby contributing to the difficulty experienced by the Auditor General's Department.

approval for the

reorganisation

It added that the ministry, in letters dated November 3, 2014 and December 18, 2014, informed the Auditor General's Department that it had given approval for the reorganisation of the department.

It said it has also given approval for the use of a contract for the recruitment of all the positions within the new Economic Assessment Unit to facilitate the necessary recruitments, while allowing the re-organisation to take place simultaneously.

The ministry said it regrets the delay in finalising arrangements and will continue to work with the Auditor General's Department to ensure it is adequately resourced to undertake its enhanced role for future fiscal policy papers.

Following the International Monetary Fund discussions on the seventh review of Jamaica's programme under the Extended Fund Facility, mission chief Dr Jan Kees Martijn noted that the Government's resolute implementation of the economic programme, centred on strengthening the foundation for growth and employment, had started to yield tangible dividends.

He also noted that while the programme remained on track and policy implementation remained strong, all quantitative performance targets through end-December were met, but the indicative target on tax revenue was narrowly missed.

mcpherse.thompson@gleanerjm.com