Tax revenues soar while macroeconomic programme remains on track
Tax revenues year-over-year for the comparative periods for April through to September 2018, increased by 8.8 per cent or $20.9 billion.
The country’s tax revenues are now at levels not previously seen as even the higher targets tabled under the First Supplementary Budget are being surpassed due to increased economic activity, labour market improvements and compliance efforts.
That’s according to the latest report of the Economic Programme Oversight Committee (EPOC), which has reported that the country’s macroeconomic programme remains on track.
As such, all targets under the Precautionary Standby Arrangement (PSBA) with the International Monetary Fund (IMF) for the period April to September have been met.
“Tax revenues year-over-year for the comparative periods for April through to September 2018, increased by 8.8 per cent or $20.9 billion, from $237.7 billion to $258.5 billion, said EPOC’s co-chair, Keith Duncan.
As a result of the overall strong performance, the Government has met all eight macro-fiscal structural benchmarks for the November 2016 to October 2018 period. The Government has also met the 14 structural benchmarks for public sector transformation, public bodies and public service reform through end-October 2018.
Duncan noted in the EPOC report that non-borrowed reserves as at the end of September 2018 stood at US$2.461 billion, significantly exceeding the programme target of US$2.14 billion, while inflation registered 4.3 per cent, bringing it back into the programme range of 3.5 to 6.5 per cent.
However, recurrent expenditure fell marginally behind budget due to delays in the procurement process, while capital expenditure was slightly behind budget primarily due to interruptions in the execution of works being carried out under the Major Infrastructure Development Programme, due to unfavourable weather conditions in the month of September.
EPOC said capital expenditure for April to September 2018 was $28.54 billion compared to $18.3 billion for the same period in the 2017/18 fiscal year. This represents an increase of 56 per cent year over year.
Meanwhile, Duncan has revealed that “the IMF is making it abundantly clear that public sector reforms should be a high priority which will create fiscal space to provide meaningful resources for much-needed security, social and growth-enhancing capital spending.”
EPOC said it supports the IMF’s call for increased focus and meaningful and impactful execution of public sector reforms.
“While we have met all the structural benchmarks to date under the IMF PSBA Programme, a significant body of work is left to be done if we are to achieve an efficient public sector,” EPOC said.
Meanwhile, as it relates to supply-side reforms, the IMF has posited that economic conditions are ripe for the private sector to step up productive investment.
“The IMF notes that private lending and investment to support the productive economy has lagged behind, and that stronger growth will require policymakers to remove obstacles to private investment in the real economy, including by supporting skills development, lowering red tape and increasing policy predictability,” EPOC said.
EPOC also supports the IMF’s push for “supply-side reforms” to facilitate private sector investment in order to achieve growth and job creation. Supply-side reforms may take the form of strategic investment in labour aligned with growth-producing sectors as well as continued development of an ecosystem that drives and fosters entrepreneurship.
Additionally, EPOC said it “extremely supportive of the announcement by the Minister of Finance to revise the pension investment limits, which is an important supply-side reform in unlocking capital for venture capital which should spur innovation, productivity and growth of the Jamaican economy.”
Overall, EPOC is of the view that the economic programme remains on track.
The fourth review of the PSBA was completed at the meeting of the Executive Board of the IMF on November 5.