Government misses February primary surplus target
The Jamaican Government's primary surplus target has fallen short by $4.6 billion for the fiscal period to February 2015. The target was for $83.3 billion, bot the Government of Jamaica reported a surplus of $78.7 billion
It was the first time the Government has missed the target in its drive to achieving a primary surplus of 7.5 per cent of gross domestic product in each year of the four-year International Monetary Fund (IMF) economic support programme.
"Normally, this would be a very worrying situation to have missed the primary balance target in February," said co-chairman of the Economic Support Programme (EPOC), Richard Byles, who made the revelation at a press briefing at Sagicor Life, New Kingston, yesterday.
However, he said that Financial Secretary Devon Rowe advised the EPOC meeting last week, that based on preliminary numbers for March 2015, to which he is privy, he expects Jamaica will achieve the mark to meet the IMF target of $121 billion for fiscal year 2014-15.
"This is reassuring to me because I don't think the FS is a man to stick his head out unless he has good reason to do so. However, I think all year we have been struggling with this business of revenue below target, and I think we need to shine the light on this issue much more in this financial year," said Byles, in releasing the 23rd communiquÈ of the non-public sector members of EPOC.
He said that net international reserves at the end of March stood at US$2.31 billion, well above the IMF target of US$1.40 billion.
The main reasons for the shortfall in the primary surplus were what Byles characterised as the usual suspects - shortfall in companies tax and general consumption tax (GCT).
"This is the trend we have been seeing over the year, but in February it was particularly bad," he added.
The big swing in February was also explained by the fact, "I am told that there were arrears that had to be cleared, and some capex payment for JUTC (Jamaica Urban Transit Company) buses."
Byles said that "particularly in respect of company tax and GCT, EPOC wants to have some discussions with the authorities about what is happening there and how can we avoid that in the future".
For the period April 2014 to February 2015, revenues and grants remain $12 billion, or 3.3 per cent lower than the budgeted $331 billion, largely as a result of cumulative shortfalls in companies tax and local GCT.
The companies tax performance was attributed to lower quarterly declarations by several companies because of anticipated benefits from the Fiscal Incentive Regime introduced in January 2014.
"Remember, if you are a non-regulated entity you pay a tax rate of 25 per cent. However, if you make all of your statutory payment on time and you get the employment tax relief you can achieve a tax rate of about 17 per cent," said Byles.
He noted that the authorities suggested "that when they look at the corporate returns, what they are seeing is less tax because people are meeting the requirements of the Fiscal Incentive Regime".
GCT shortfall of $7 billion continues to reflect the impact of higher refunds, in spite of the higher gross collections year-on-year, he said.
Pay-as-you-earn taxes continue to exceed budgeted intake and was 8.7 per cent higher than the same period the previous year. Grants totalled $4.8 billion, which was $2.6 billion, or 34.4 per cent below budget.
Expenditure was $13.2 billion below budget with the recurrent contributing $4.2 billion and the capital $9 billion. However, that was not enough to compensate for the revenue shortfall and primary surplus underperformance.
The fiscal deficit of $39.2 billion, while remaining three per cent better than the programmed $40.4 billion, is higher than the corresponding period in fiscal year 2013-14, the communiquÈ said.