The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Government has exceeded its Excise Tax revenue projections by almost 62 per cent for the 2011-2012 fiscal year, it was disclosed yesterday, collecting some $340 million during the final year of the Ingraham administration.

Explaining the seemingly outlandish $358 million Excise Tax revenue estimate for the 2012-2013 fiscal year, a 70.5 per cent increase over the previous year's $210 million Budget projection, Michael Halkitis, minister of state for finance, said the forecast was only an $18 million increase year-over-year above the actual outturn.

He added that this was based on the significantly higher-than-expected Excise Tax revenue intake in 2011-2012, with additional revenue expected to be generated this coming fiscal year from a crackdown on tobacco product smuggling via the use of Excise Tax.

Speaking with Tribune Business, Mr Halkitis acknowledged the projected outturn for Excise Tax in 2011-2012 was considerably higher than the original projection in last year's Budget Communication.

"Last year, the Government had estimated some $210 million to be collected. The amount that was collected was more in the area of $340 million," Mr Halkitis told Tribune Business.

"That was due to better performance of the Excise Tax on gasoline, diesel, automobiles, so that this year when we projected an intake of $358 million we were projecting an increase of only $18 million, which was an increase of roughly 5 per cent. That is consistent with the growth of the economy and our other projections."

Mr Halkitis said the Government estimates that it can gain upwards of $20 million through its Excise Stamp programme aimed at reducing leakage in tax collection on imported tobacco products.

He explained: "We estimate that we can get upwards of an additional $20 million a year if we eliminate smuggling altogether. We intend to put in place a programme by January 2013.

"We have also put in the Budget an additional $10 million we think we can get in the six months between January 1, 2013, and June 30, 2013 for better collection of the Excise Taxes."

Mr Halkitis said during his closing contribution to the 2012-2013 Budget debate that the Government will place particular priority on a fundamental reform of the tax system and its administrative structure, in order to bring recurrent revenue to a more appropriate level relative to the size of the economy.

He said: "At a level of 18.3 per cent of GDP, our recurrent revenue falls well short of that in many other countries, where the Government revenue-to-GDP ratio is in the mid-20 per cent to 30 per cent range.

"The issue of tax reform will be addressed in a White Paper that will be prepared to serve as the basis for extensive public consultations. It will speak to the major deficiencies in our current tax system, and will propose a way forward for the tax system such that it will be adequate to finance a modern 21st century public administration.

"As for reform of tax administration, the Government announced it will proceed with the creation of a new Centralized Tax Agency. The new agency will consolidate revenue collections and maximise the effectiveness and efficiency of tax administration on the basis of international best practices."