Bahamas Government Deficit Near-Miss as VAT $160Mn Off Target

  • The Government narrowly missed its deficit target for the recently closed 2022-2023 fiscal year despite a near-$160Mn undershoot on its VAT forecast. The Ministry of Finance, unveiling its monthly report for June 2023, which also represented the fiscal year-end, disclosed that the $533.4Mn full-year deficit was just 2.5% or $12.8Mn higher than the revised target of $520.6Mn presented with the 2023-2024 Budget at end-May.
  • That outcome was also some $42Mn, or 7.3% lower, than the $575.4Mn deficit target set in the original 2022-2023 Budget. The Government largely kept the latter figure, which represents the difference between its spending and revenue income, on target despite failing to achieve its VAT ambitions for the period.
  • VAT, the Government’s main revenue source, accounting for almost 48% or nearly half its recurrent income, came in a material 11.3% below the 2022-2023 full-year projection of $1.412bn to stand at $1.252bn.
  • As a result of this outcome, the Davis administration must now bridge a $339Mn gap between that figure and this year’s $1.591Bn forecast if it is to achieve its VAT ambitions and likely wider revenue and budgetary goals. That would amount to a 27% year-over-year increase.
  • Fiscal observers suggested this was too wide a gulf to overcome, as figures for July 2023 - the first month of the current fiscal year - showed VAT revenues increasing year-over-year by just $6.8Mn from $140.1Mn the prior year to $146.9Mn.
  • Based on the $339Mn ‘gap’, they added that the Government needs an average increase in VAT collections of $28Mn per month to bridge this, and July’s jump was well short of the latter figure even though it represented June’s filings and is one of four ‘bumper’ months in which all registrants - quarterly as well as monthly filers - remit taxes collected from the end consumer to the Public Treasury.
  • Despite the VAT undershoot, the Government can take comfort in the fact it almost scored a direct hit on its total revenue target for 2022-2023. Total income came in just $1.5Mn below target at $2.856Bn, with taxes on international trade and transactions and other taxes on goods and services exceeding Budget targets to compensate for the VAT miss.

(Source: The Tribune)