BDA: Poor revenue could lead to cuts
Bermuda could be facing serious financial cuts due to poor Government revenue according to the Bermuda Democratic Alliance.
Yesterday Premier and Finance Minister Paula Cox told the House of Assembly Government received $446 million in revenue during the first half of the 2010/2011 fiscal year.
BDA Finance spokesman Michael Fahy said he believed this meant Government was 15.7 percent behind initial predictions and could be facing a $166 million shortfall if the trend continued.
Ms Cox said such a statement was “erroneous” and did not take into account that taxes are not paid evenly year round.
Earlier yesterday Ms Cox answered a Parliamentary Question posed by BDA MP Shawn Crockwell. The question asked how much revenue Government had received between April 1 and September 30, the first half of the fiscal year.
She said Government had received $446 million and added: “[This] is $15 million or 3.5 percent higher than the corresponding period in 2009/2010.”
Speaking outside the House, Mr Fahy said he believed Government should have received $529 million in revenue at the mid-point of the fiscal year based on their budget prediction of earning $1.058 billion in revenue from taxes such as payroll, customs duty and hotel occupancy tax.
“This [$446 million] represents a severe shortfall in revenue for the Government. Some $83 million short,” he said. “It could mean that the actual revenue for 12 months could be $892 million, which is a $166 million shortfall. At the moment the Government is 15.7 percent short on its prediction.
“This is a serious, serious problem. It is clear, per our predictions, that the payroll tax increase has not had the desired effect on increasing Government revenue.
“The situation is so bad that [Deputy Premier] Derrick Burgess reportedly said that the Government has no money to fix accident black spots and prevent road fatalities.
“What else does the Government not have money for? What costs are being cut?
“What is being done to rein in the spending to match the actual revenue collected?”
Last night Ms Cox said the comments were “extremely erroneous” as Government's revenue are not collected evenly through the year. “For instance, a major revenue earner for Government is international business fees and other company taxes,” she said. “These amounts are collected in January of each year and therefore would not be included in the first six months of a fiscal year. It is anticipated that over $64 million will be collected in various company fees in January 2011.”
Moreover, Ms Cox said the Parliamentary question asked how much Government received during the first half of the 2010/2011 fiscal year, which was the answer that was provided.
This means some of the payroll revenue collected in the first half of the fiscal year are actually revenue from the 2009/2010 fiscal year and were collected on the old rate.
Ms Cox said: “Mr Fahy is assuming that all payroll tax reported in the first six months of this fiscal year has been collected at the increased payroll tax rates. This is not correct.
“It must be noted that the payroll tax collected in the first quarter of the current fiscal year were at the old rates, that is before the payroll tax increases. These taxes related to the prior fiscal year but were collected and recorded in the current fiscal year.
“The new rates came into force on April 1, 2010, and the first payroll tax payments using this rate were made in July 2010. The information provided reported the taxes collected by Government during the first six months of the year on a cash basis.
“Mr Fahy's assumptions are off base.”
She added that she was confident the Government would be able to “restrain growth in spending” through disciplined financial management.
“The Government continues to institute policies that will instill strong financial discipline, at all levels of government, in the management of taxpayer dollars,” she said.
This is the third year in a row there has been concern about Government's revenue. In 2008/9 Government collected $32 million less in revenue than expected. The shortfall was blamed on a drop in Customs duty, passenger taxes and stamp duty.
Last year Government projected it would raise $969 million through taxes and duty. Five months into the year revenue were down by $14.9 million, by the end of the year Government was $35 million short of its revenue projects.