The Tribune

• As top tax revenue lines all see ‘double digit’ growth

• Top official optimistic ‘we’ll see fruits of our labour’

• Bran: ‘Huge explaining to do’ if IMF more accurate

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government was yesterday urged to “prove the IMF wrong” over its deficit blow-out forecast with this nation’s top finance official revealing all major revenue lines are enjoying “double digit” growth.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that officials “feel confident we are trending in the right direction” for 2023-2024 despite the International Monetary Fund’s (IMF) grim prediction that the full-year fiscal deficit will be almost three times’ the Davis administration’s $131.1m projection.

Pointing to the crackdown on tax cheats, and multiple enforcement and compliance measures to generate increased revenues, he added that the Ministry of Finance was optimistic “we’ll see the fruits of our labour” during 2024’s first four calendar months when the Government traditionally generates the bulk of its income.

With the increase in cruise passenger departure taxes set to also take effect from New Year’s Day 2024, Mr Wilson told this newspaper that the January-April period next year will “tell the story as to whether we will achieve our revenue targets” and - by extension - Budget forecasts for the current fiscal year.

Tribune Business yesterday revealed that the IMF, in its statement on the annual Article IV consultation with The Bahamas, effectively blew a hole in the Davis administration’s Budget projections by warning the 2023-2024 fiscal deficit will likely be almost triple its 0.9 percent of gross domestic product (GDP) forecast.

The Fund instead estimated that the deficit will be “considerably larger than that expected in the Budget” at a sum equal to 2.6 percent of gross domestic product (GDP). This outcome, if it ultimately turns out to be true, would see The Bahamas’ deficit balloon to around $378.73m compared to the Government’s $131.1m forecast - a $247.6m difference.

Mr Wilson, though, said these predictions are no cause for alarm or panic at this early stage in the fiscal year. He described the IMF as taking “a much more conservative fiscal view” than the Government, and reiterated that there will be no policy changes such as increased tax rates to burden Bahamian consumers and businesses.

However, observers warned that the Government will have “some huge explaining to do” if the IMF’s fiscal forecasts turn out to be more accurate than its own. Branville McCartney, the former Democratic National Alliance (DNA) leader, told Tribune Business of the vastly different forecasts: “The Government has some explaining to do to justify their projections against the IMF’s.

“I think that is quite significant. The Government has been going around speaking about their fiscal policies and how they benefit the country. With this information coming from the IMF, it goes contrary to what they have been saying, promoting and even campaigning. The Bahamian people ought to demand the Government justify what they are saying compared to what the IMF are saying.

“Prove the IMF wrong. I absolutely hope they can. That would benefit the country. Prove the IMF wrong in what they are saying. That should be done post-haste. There’s a significant difference between what the Government is saying and what the IMF is indicating. Someone is wrong and I hope that the Government can prove it’s the IMF,” Mr McCartney added.

“Otherwise it has some explaining to do. It will have some huge explaining to do. In the spirit of transparency and accountability, this is an instance where the Government can prove they are transparent and accountable when it comes down to the finances of the country. That is paramount. My God. This is a biggie.”

The annual fiscal deficit measures how much the Government’s spending exceeds its revenue, and Mr McCartney added: “What the IMF said is like getting a sack full of coal under the Christmas tree.” Time will tell who is correct, but if the IMF is right it will likely mean that the Davis administration’s ambitions of achieving a $109.2m fiscal surplus in the 2024-2025 Budget year will have to be pushed back.

The IMF itself is also less-than-optimistic about that forecast, projecting that instead of a surplus the Government will run a fiscal deficit equal to 2 percent of GDP - around $291m at current numbers - in the 2024-2025 fiscal year. While the Davis administration continues to work on new revenue streams, such as carbon credits, the implication is that fiscal consolidation’s pace will be much slower than forecast.

Mr Wilson, though, said it was “early in the fiscal year” and too soon to determine whose forecasts are the more accurate. However, he signalled that the Government presently remains confident it can hit the 2023-2024 fiscal targets almost five months into the period and, in so doing, boost the confidence credit rating agencies and domestic/international creditors and investors have in The Bahamas.

“We feel confident we are trending in the right direction,” the financial secretary told Tribune Business. “All our key revenue areas are up by double digits but it’s early. Most of our revenue comes in the second half of the fiscal period.

“I know we’re doing the work. If we’re doing the preparatory work we expect to see the fruits of our labour at the appropriate time. Once we do the preparatory work we’ll see the results. If we were not doing the work, I’d be concerned. I know we’re doing the work.”

The Government traditionally earns the bulk of its revenues during the calendar year’s first four months, or Budget year’s second half, which coincides with the winter tourism season’s peak economic activity, Business Licence fee payments, the bulk of real property tax collections and commercial vehicle licensing month.

Mr Wilson pointed out that “all of our revenue measures take effect from January 1 next year”, including the increase in cruise departure taxes, which are forecast to near-triple from the $50.642m projected in 2022-2023 to $144.89m.

“Then there is the work we have done with the property tax register. Those property tax bills go out this month. There is the work we have done with Business Licence enforcement, and the new requirements for an audit take effect next year,” he said.

“We’ve done a lot of work legislatively as well as administratively, and believe we will see the fruits of those efforts in the next big revenue cycle between January and April next year. That will be the key. We have done more audits than ever before this year for VAT and Business Licence fees, we have done the Family Island reassessments and our compliance programme is going well.

“We have good support from the commercial banks for real property tax, making sure mortgagees pay their property tax. We have done these things that have not been done before. We fully expect to see the results of our efforts during the first four months of next year, and that will tell the story as to whether we achieve our revenue targets. I’m confident because we have done the work; no one can dispute that.”

Mr Wilson added: “The IMF have a much more conservative fiscal view than we have. They are very conservative. I think we’re OK. We always do adjustments, we always do measurements. We monitor revenues on a weekly basis. You’re not going to see us increasing rates or anything like that.”