Fiscal deficit target exceeded again

A $1.5 cut in interest payment, a $2 billion reduction in capital spend and $1 billion saved on programs was more than enough to wipe out a reduction in revenues of $2.4 billion due to a number of factors in June this year.

Some $440 million in the revenue shortfall came from increased payment of withholding tax refunds on interest. Tax on dividends may have been over estimated on the assumption that the payment pattern would have remained. Instead many companies brought forth payments to March thus beating the taxation for a part of the annual payment.

Telephone tax was way down no doubt a result of lower calling rates. Overall international trade delivered as planned but a few fell somewhat short. Local GCT was 15 percent up or around $500 million over forecast and was up 6 percent above the amount collected in June last year, while SCT fell short by $700 million against 2013/4 budget but this may be due to a shift between May and June as the May target was over achieved and may have shifted some of the inflows to that month which enjoyed $900 million more inflows than planned. Company profit tax fell $500 million short of plan.

Due to the savings on the expenditure side and overachievement in the first two months, the fiscal deficit to date is running well ahead of plan by $4.8 billion, resulting in the deficit coming in at $5.4 billion. The deficit for May was just $1.63 billion against projection of $3.7 billion. The target for July is for a deficit of $1.7 billion, but August is a huge $10.8 billion.

Compared to 2012 revenues, this year is running well ahead of the quarter to June last year by 13.5 percent and 16.5 percent in the month of June versus June last year. In the past, the challenges start to occur in July and onwards when revenues starts to fall off from target. The sharp slowdown in cigarettes sales reported by Carreras could negatively affect special consumption tax revenues going forward for a while at least.