Shaw cuts spending, goes overboard on debt
Published:Friday | December 17, 2010 | 12:00 AM
Having overestimated the munificence of foreign governments and agencies whose sponsorship has shored up the Budget in good times and bad, the Government of Jamaica fell close to J$4 billion short of revenue in seven months of operation.
But Finance Minister Audley Shaw, whose business-friendly reputation has taken a hit after he dosed alcohol producers with higher taxes this month, was not as liberal with his spending patterns.
So, even as the central government finances are denied targeted revenues - of a targeted J$8.7b of grants, only J$5.2b flowed into the Treasury - he has cut more than J$13 billion of planned spending in the same seven-month period ending October 2010.
Shaw sliced the Budget for capital projects - the area seen by Keynes disciples as one of the most stimulative of government-backed activities - spending J$28 billion after chopping close to J$9 billion.
Overall, he collected J$169 billion but spent J$215 billion. But that still gave the Government a smaller deficit of J$46 billion, relative to the J$55 billion initially forecast at the top of the fiscal year.
The finance minister's discipline, however, did not extend to his borrowing activities. Here, Shaw fell off the wagon with loan receipts of J$123 billion, J$12 billion more than he said he would have borrowed.
The overextension has left him with J$7 billion to set against upcoming expenses.
Jamaica collects between J$18b and J$27b in taxes each month. Since April, collections have hit J$149 billion, which is J$400 million less than Shaw had budgeted for. Inside the numbers, the contracting economy continues to weigh on jobs and, as such, personal income tax receipts are off target by more than J$4 billion, with collections topping J$28.5 billion, even as corporate income taxes have blossomed, suggesting Shaw may have underestimated just how much profit companies would make in the ongoing recession. He expected a J$10.85b tax payday from profits as at October, but got J$12.2 billion instead.
Consumption taxes of J$44 billion have performed to expectations, with a slight uptick in GCT to J$26 billion, but international taxes of J$52 billion were off the mark by J$3 billion.