The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE GOVERNMENT increased its 2025-2026 full-year revenue target despite being off-pace the original forecast with latest Budget figures showing it had a $700m shortfall to make-up during the final June month.

The Ministry of Finance’s May 20226 monthly report, which represents the latest official figures, shows total revenues for the first 11 months of the prior fiscal year stood at just 81.8 percent of the full-year target with tax income faring slightly better at 82.8 percent. However, both appear to be behind the pace needed to meet the Davis administration’s initial revenue targets with just June to go before the 2025-2026 year-end.

Total revenues at end-May were shown to be some $700m off the full-year target, standing at $3.187bn as opposed to the original $3.896bn target. Given that the Government received $310m in total revenues in June 2025, were it to match or enjoy a similar performance, that would take the 2026 year-end figure to around $3.5bn - still almost $400m short of the original target.

Yet, as confirmed by both the Opposition and Fiscal Responsibility Council, a key public finances watchdog, the Government at the close of the June Budget debate increased - rather than lowered - its 2025-2026 revenue goal by $196.5m to $4.083bn even though it was on pace to miss the original forecast with 11 months of the fiscal year gone.

That revised target represents an almost-$900m difference from the end-May 2026 number, and would seem an impossible gap to close in just one month. Kwasi Thompson, the Opposition’s finance spokesman, told Tribune Business he had challenged the Government’s justification for revising the revenue numbers upwards when they seemed to be trending in the opposite direction but got no reply.

“The reports indicated they were below target, but they were increasing what they believed will be the intake,” Mr Thompson recalled. “What is the justification for doing that? I didn’t get an answer on that: What is the justification for doing that?”

However, the Government may have had an ace in its sleeve to at least narrow the revenue gap considerably: Income from a new revenue stream, the domestic minimum top-up tax (DMTT), or 15 percent corporate income tax, which was to be imposed for the first time on all Bahamas-domiciled firms that are part of multinational groups with an annual turnover in excess of 700m euros.

This would likely have caught the likes of Atlantis, Baha Mar, the Bahamas Telecommunications Company (BTC), Royal Bank of Canada, CIBC Caribbean, Scotiabank, Shell’s trading arm, Commonwealth Brewery and even Sandals.

Michael Halkitis, minister of finance, and his successor as minister of economic affairs, Senator Jerome Fitzgerald, have both said there are far more qualifying corporate income taxpayers than the Government originally anticipated. The latter recently said that only ten had been anticipated, but there are actually more than 30 - triple that number.

This would explain why the Government has increased the projected DMTT revenue intake from the initial $130m for the first year to some $330m for the current 2026-2027 fiscal year. However, for that to benefit the 2025-2026 fiscal year and narrow the revenue gap, whether $700m or $900m, the Government will have to fulfill Mr Halkitis’s pledge that the DMTT taxes would be captured and booked in June before the period closed.

The Fiscal Responsibility Council and others have previously questioned whether that could be achieved given that key aspects of the DMTT regime, such as regulations, guidance notes and collection mechanisms had yet to be released or fully disclosed to taxpayers. One well-placed fiscal source, speaking on condition of anonymity, agreed that the 2025-2026 revenue targets are out of reach “unless they expect that new revenue stream to have been booked in June”.

“That is the only way they are going to make that particular revenue number,” the source added of the DMTT. “The story here is the delta between the revised revenue figure and where they ended up the end of May; $900m more to go to make the revenue target. The chance of them making that is nil.”

If the $330m DMTT target for the current fiscal year was met in June 2026, so that it was booked in the prior 2025-2026 period, when added to 2025’s $310m this could have given the Government a combined $640m revenue windfall for the month. This would have left it just $70m short of the original $3.897bn revenue target, but around $260m-$270m below the revised $4.083bn number.

The Davis administration, though, was able to keep the revenue shortfall from blowing a hole in its annual deficit by controlling spending. Both total and recurrent spending on its fixed costs stood at close to 86 percent of total Budget estimates at end-May 2026, signalling that the Government is likely to beat (come in below) its 2025-2026 spending targets.

However, the source pointed to questions over whether the Government had used accounts in the name of the not-operational National Investment Fund to keep spending off-the-books in the general election run-up and thus prevent it from adding to the deficit. “It’s a lot easier to meet your targets when you shift $700m off to the National Investment Fund or other fund you have. That helps a lot by booking against the Fund,” they added.

The Government achieved its $29.2m Budget surplus for May despite tax revenue falling by $4.1m or 1.7 percent to $233.9m. “Taxes on financial and capital transactions increased by $16.9m (147.2 percent) to $28.4m, owing mainly to higher stamp duty collections on financial instruments and mortgage-related transactions,” the Ministry of Finance report said.

“Taxes on international trade and transactions decreased by $8.5m (12.8 percent) to $58.1m, led by a $10.8m (47.3 percent) reduction in excise duty collections. VAT receipts declined by $7.1m (5.9 percent) to $112.2m. Non-tax revenue expanded by $7.7m (25.5 percent) to $37.9m, supported by a $10.2m gain in transfers and a $1.3m rise in property income.”

VAT was the only major revenue source likely to meet the 2025-2026 full-year goal, standing at 92.1 percent after 11 months or $1.404bn of the $1.525bn anticipated to be collected.

Meanwhile, on the spending side, the Ministry of Finance’s report said: “Recurrent expenditure was higher by $7.5m (3.3 percent) year-over-year at $233.2m in May 2026. Subsidies grew more than two-fold to $38.4m on account of higher transfers to public non-financial corporations.

“Personal emoluments rose by $6.5m (9.4 percent) to $76m, reflecting increases in wages and salaries and employer social contributions. Transfers grew by $4.4m (42.6 percent) to $14.6m,representing gains of transfers to households and public entities.

“These increases were partly offset by a $19.9m (32 percent) decline in interest payments to $42.3m, with reductions in both domestic and external components. Capital expenditure decreased by $3.9m (29.6 percent) to $9.3m. This outcome was primarily explained by a $4m (33.9 percent) reduction in spending on the acquisition of non-financial assets, particularly on buildings, infrastructure works, machinery and equipment.”

Turning to the impact on the national debt, the Ministry of Finance report added: “During the review month, central government’s financing activities resulted in a net repayment of $25.1m. Gross borrowings totalled $100.7m consisting of entirely domestic debt issuances, comprising of Treasury bills and notes (57.9 percent) and bonds (42.1 percent).

“Aggregate debt repayments amounted to $125.8m, of which 99.4 percent related to domestic currency obligations and 0.6 percent to foreign currency obligations.”