The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A governance reformer yesterday acknowledged it would have been a “challenge” for the Government to bridge the $350m gap to its full-year VAT target during the final two months of the 2022-2023 fiscal period.

Hubert Edwards, head of the Organisation for Responsible Governance's (ORG) economic development committee, told Tribune Business the concession by Simon Wilson, the Ministry of Finance's financial secretary, that the Government is likely to under-shoot its VAT goal for the recently-closed fiscal year could be a sign of revenue “weakness” that raises concern about the likelihood of hitting higher 20230-2024 targets.

“They are under-shooting the projection on VAT, that is basically what the financial secretary said. So if they are under-shooting their projection then obviously that would be a little bit of a challenge, which we would not want because we want them to hit the target," he added.

Mr Edwards was responding to this newspaper's revelation that the Government was unlikely to meet its full-year VAT target for 2022-2023 because, with two months left in the period, it had collected some $1.063bn to leave a near-$350m gap to the $1.412bn goal for the period.

The Government’s monthly fiscal snapshot for April 2023, released last week, revealed that with just two months of the 2022-2023 fiscal year left, that near-25 percent or $350m gap appears to be too steep to bridge. The 2022 comparative period shows that VAT collections for May and June stood at $94.5m and $85.2m, respectively, representing a collective $179.7m.

A repeat performance would take full-year VAT revenues to just over $1.242bn for the 2022-2023 full-year, some $170m short of target. Mr Wilson told Tribune Business that the Government’s tax and revenue agencies are targeting the Family Islands, marine industry, tourism and services sector with more stringent compliance measures to ensure VAT hits its $1.591bn target for the 2023-2024 fiscal year.

But several sources yesterday, noting that VAT was projected to account for almost 50 percent or half the Government’s $2.857bn total revenues in 2022-2023, said that despite the under-shoot collections of this tax are projected to increase by almost $180m year-over-year to $1.591bn for the current 2023-2024 fiscal year. This raises questions as to how the Government will hit this hiked target.

Mr Edwards, though, said it was more important for the Government to hit its total revenue and total tax targets. Total revenues and total tax revenue, at $2.356bn and $2.079bn, respectively, stood at 82.4 percent and 81.9 percent of full-year target after the first ten months, and appear much more in reach.

"The financial secretary also said that barring the VAT being off, there were other areas will compensate for the shortfall and, within the context of the circumstance, as far as I’m concerned it is the overall number which is of the greatest concern," Mr Edwards said.

“If you can make the top-line projection, the cumulative projection, then there would be no negative impact on the deficit at the end of the day. I think that is what’s most important. However, if this under-shooting represents any weakness in the projections going forward, because we are talking about 2022-2023, if this is an indication of any weakness, then they would raise some concerns for 2023-2024.

"We’re hoping that that’s not the case, because if it is then obviously the persons who are watching at the ratings agencies and other entities will be put on high alert. The extent to which the collection has lagged, then obviously the Government agencies would have to work harder - and work in a more consistent way - to ensure that collections are maximised.

“The projections for 2023-2024 in many ways, as the financial secretary indicated, are ambitious, and he indicated, too, that they are achievable. So we will have to judge the level of achievability on the actual performance. By the end of the first quarter in September we should have a fair idea as to how the revenue has trended.”