Challenging tax-revenue target for March quarter
The tax revenue-target of J$375.5 billion for the 2013/2014 fiscal year will prove challenging to achieve during the quarter to March, this year, according to co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles.
However, Byles, said that if the Government falls short it could make it up with either grants, sale of assets or further cutting back on expenditure.
Notwithstanding, the Government and the International Monetary Fund (IMF) have agreed that the target may be revised down by less than 0.2 per cent of gross domestic product (GDP).
The March quarter, according to Byles, has traditionally been the strongest for tax collection.
However, the IMF, in its December country report number 13/378, said that while the revenue floor under the loan programme with Jamaica has been met thus far, receipts have fallen behind the Government's monthly budget projections, and a shortfall relative to the staff's earlier revenue projections is now expected to arise later in the budget year, due to the smaller tax base than foreseen in earlier projections.
New tax-incentive regime
In addition, the introduction of the new tax-incentive regime at the start of 2014 poses risks to initial tax receipts as entities may tailor the timing of their transactions in a manner that limits their tax obligations, the report said.
Byles, speaking at a press conference in New Kingston last week where he released the latest EPOC communiqué on its monitoring of the IMF agreement, said the December outlook for revenues could be a little better than it was for November.
He said technocrats in the Ministry of Finance and Planning advised EPOC that December was the end of a quarter and, therefore, estimated corporate taxes get paid at that time.
Second, he said, November ended on a weekend, and hence some general consumption tax returns which were due at the end of the month "don't get paid in that month but roll over into the following month".
Byles said the technocrats felt fairly confident that the Government will reach the primary balance target of $111.5 billion.
However, he added that "tax revenue targets may be a little bit more challenging".
Byles, who is also president and chief executive officer of Sagicor Life, noted that "projecting is a very imprecise thing, even in my business", and that governments over the years had not been the most precise in being able to say what happens in the economy.
"But they are doing a lot of work behind the scenes to make sure that in the future when the budget is forecast - and this is all part of the IMF conditionalities - that they do so in a more precise manner," he added.
IMF staff has also underscored the critical importance of strengthening revenue forecasting as a critical aspect of the rules-based fiscal framework.
Byles emphasised that structural benchmarks for the March quarter are also important, among them the Omnibus Banking Act which will deal with how financial groups are structured, and enhancement to the Fiscal Responsibility Act, commonly referred to as the fiscal rule.
Under the fiscal rule, incumbent and succeeding governments, "no matter which party is in power, the budgets that they present and the outcomes have to be in accord with a path to get to (debt to) GDP ratio of 60 per cent over a certain period of time," he said.
"We look forward to seeing the particulars of that piece of legislation and EPOC will be looking at it during January, and at our February meeting we will be discussing it," Byles said.