Mr. Speaker this has been a period like no other in Jamaica’s history. The COVID-19 pandemic has had a severe impact on the Jamaican economy.
Six Month Revenue Performance
Despite that Mr. Speaker, the preliminary numbers for the six months ending September 30, show that overall revenues were $8 billion or 3% higher than budgeted in the First Supplementary Estimates but 18.8% lower than for the corresponding six months last year.
The preliminary data shows that the Income and Profits subcomponent was ahead of budget by 8% and behind last year by approximately 5%. Corporate Taxation and PAYE performed ahead of budget by 16% and 8% respectively. In fact PAYE for the first six months of this financial year was ahead of PAYE returns for the corresponding period last year by 3%.
For the six months, preliminary figures indicate that Production and Consumption Taxes were also up by 7% versus budget but 14% lower than last year. In this category SCT was up significantly vis-àvis budget though GCT receipts on local activity were 3% lower than budgeted and 16% less than the first six months of last year.
Revenue from International Trade taxes was lower than budgeted by 3% and lower than last year by 32% over the comparable period. Consistent with the fall in trade volumes, Customs duty, Stamp Duty and GCT on imports were 7%, 28% and 1% lower than budgeted and 21%, 40% and 27% lower than last year. Consistent with the dramatic reduction in passenger flight arrivals, Travel Tax receipts were down by $9.5 billion or 80% on last year.
SECOND SUPPLEMENTARY ESTIMATES
The Second Supplementary Estimates for FY 2020/21 have been developed within the framework of this outturn as well as taking into consideration the continued impact of the Coronavirus Disease 2019 (COVID-19) on Jamaica and globally.
The First Supplementary Estimates were formulated around an estimated decline of 5.1% in GDP for the fiscal year. However, GDP is now estimated to decline by 7.9%. This new forecast has informed development of the Second Supplementary Estimates.
Based on the operations to date, and the GDP forecast, revenue and grant inflows for the full fiscal year are now estimated to be $5.2 billion more than indicated in the First Supplementary Estimates.
Given the prolonged and increasing impact of the pandemic, and taking the revenue forecast into consideration, the Government has found it necessary to increase expenditure to meet Covid-19 related needs in health, education and social welfare in the form of unemployment support. The Government is also increasing capital expenditure to support and catalyze economic activity.
Primary Balance Target
Proposed increases in recurrent and capital expenditure in the Second Supplementary Expenditure will be financed by the level of expected revenue over-performance as well as by further reducing the primary balance target from 3.5% of GDP to 3.1% of GDP.
With the lower GDP growth projection, and the prolonged intensity of the pandemic some downward revision of the primary balance target was unavoidable.
Increased Primary Expenditure of $16.6 billion proposed in the Second Supplementary Estimates is therefore facilitated by the $5.2 billion in additional revenue and $11.4 billion arising from the downward adjustment to the primary balance target.
Parliament is asked to note that the downward revision to the primary balance target for this fiscal year will be addressed in subsequent years, consistent with our Fiscal Responsibility Law, to ensure that the 2027/28 timeline for achieving the debt/GDP of 60% is met.Download Full Speech