Premier: BDA “Extremely Erroneous” on Revenue

December 12, 2010

[Updated] The Premier and Minister of Finance Paula Cox said Friday’s statement from the Bermuda Democratic Alliance [BDA] about Government’s revenue is “extremely erroneous” as Government’s revenues are not collected evenly through the year.

On Friday [Dec 10] BDA finance spokesperson Michael Fahy said the budget statement predicted $1.058 billion in revenue for the fiscal year, so after six months $529 million revenue should be been collected, however the revenue collected was $446 million – $83 million short.

The revenue charts below were extracted from the full 2010/11 Budget Statement:

bermuda budget 2010 chart 3

bermuda budget 2010 chart 4

Mr Fahy said while they recognize that “there is still six months to go and not all revenue collection arms will have reported” it “represents a severe shortfall in revenue for the Government. Some $83 million short! It could mean that the actual revenue for twelve months could be $892 million, which is a $166 million shortfall.”

Mr Fahy’s statement was generated from answers received to Parliamentary Questions set by BDA MP Shawn Crockwell in the House of Assembly.

Premier Cox said “This statement is extremely erroneous as Government’s revenues are not collected evenly through the year. For instance, a major revenue earner for Government is International Business fees and other company taxes. 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.”

The Premier continued on to say that Government will “restrain growth in spending through disciplined and effective financial management and will continue to keep the tax payers informed of the facts.” During the recent Throne Speech, Government proposed to “restrain growth in spending and to effect savings of at least $150 million in the first year.”

Premier Cox’s full statement follows below:

Mr. Crockwell is confused and clearly does not understand the content of the responses provided (please see at the bottom of the email). And, as he was not present during the oral question period, there was no further interaction on these questions so that he could gain a better understanding.

This statement is extremely erroneous as Government’s revenues are not collected evenly through the year. For instance, a major revenue earner for Government is International Business fees and other company taxes. 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.

Mr. Crockwell is assuming that all payroll tax reported in the first 6 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. Crockwell assumptions are off base.

The Government continues to institute policies that will instill strong financial discipline, at all levels of government, in the management of taxpayer dollars. We will restrain growth in spending through disciplined and effective financial management and will continue to keep the tax payers informed of the facts.

The three Parliamentary Questions set by Mr Crockwell were:

1. Will the Honourable Premier please tell this Honourable House if the Bermuda Government has an overdraft arrangement with one or more of Bermuda’s banks that has an aggregate of more than $50,000,000.00?

2. Will the Honourable Premier please tell this Honourable House how much revenue has been received by the Bermuda Government in the period 1 April 2010 to 30 September 2010?

3. Will the Honourable Minister please tell this Honourable House if the Bermuda Government will release the Financial Statements of the Consolidated Fund for the Fiscal Year 2009/2010 before this Honourable House rises for its Christmas Break?

The three Answers Submitted by Premier and Finance Minister  Cox were:

1. As at December 10,2010 the Bermuda Government has no overdraft arrangement with any of Bermuda’s banks that has an aggregate of more than $50,000,000.

2. For the first six months of fiscal year 2010/11 Government collected revenue of $446 million which is $15 million or 3.5 % higher than the corresponding period in 2009/10$

3. The accounts of the Consolidate Fund for the Fiscal Year 2009/2010 will not be tabled before this Honourable House rises for its Christmas Break, but will be tabled when this House reconvenes in February 2010. When the accounts are tabled, I will make a full Ministerial Statement in this Honourable House.

Update Dec 13, 10am: Michael Fahy’s full response below:

The Honourable Premier is correct that not all revenue has been reported, which is what was indicated in our statement on Friday.

Nonetheless, we remain very concerned that the revenue projected will be severely short, with the low end of the scale being $892 million and the upper end being in the region of approximately $970 million taking into account revenue from international companies, which will also likely fall short of projections. The fact is that whilst the six month revenue collection is reportedly 3.5% higher than last year, given that the budget projection is seeking a 13.3% revenue increase, a rise over six months of only 3.5% is not good by any stretch.

We stand by our view that there will be a revenue shortfall based on the projections. Perhaps the Honourable Premier will advise the country prior to the Budget two things which will assist us in getting an even clearer picture of the state of the Island’s finances. What is the public expenditure to date? What is the current state of the public sector pension funds?

There are of course three very important points of note. First the Honourable Premier did not reconfirm her projections in her statement. Secondly the financial statements for the consolidated fund are late. Very late. Why? Third we are still waiting to hear how exactly the Government continues to institute policies that will “instill strong financial discipline, at all levels of government, in the management of taxpayer dollars.” We believe the taxpayer deserves to know what exactly is being done to save money, especially when the latest statistics show that whilst every measureable sector fell, the only area that rose was public administration.

The fact remains that Bermudians are not doing as well as a few years ago. While more children require school breakfasts and at least one Government Minister is admitting there is no money in the public purse, some in Government will try and have you believe that the Government has done nothing wrong in managing the public purse. It simply beggars belief. The sums don’t add up. There is however one thing that is consistent across the board – it is apparently always someone else’s fault for where we are today. The only way to fix the problem is to first acknowledge that there is one. That time has come.

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Articles that link to this one:

  1. Fahy On Government Revenue: “$83 Million Short” | Bernews.com | December 12, 2010
  1. Googlybda says:

    The Premier points out a valid variance between the first half revenues and the second half revenues. Clearly in evidence of increased taxes for the second half. However the total revenue from company fees is only 6.7% of total revenue!
    No mention of the probable negative effects on second half such as:

    Payroll tax – less people here
    Hotel Occupancy – less tourists
    Passenger tax – less cruise ships
    Land tax – less houses sold
    Payroll tax – less people here

    These areas represent 50% of total budget.
    Explain how these go up?
    The increase in Payroll tax I am not sure when it commenced, but if it was April1st. Then no increase in second six months anticipated, just reductions for lower work force.

  2. observer says:

    Given that graph, I’m going to assume we won’t see the payroll tax cut that would stimulate spending.

  3. Dragging A Lure says:

    To Mr.Fahy,
    Why don’t the BDA compare apples with apples by applying and showing the public though a graph format that Paula Cox and Government are deceiving the people. I believe that the BDA are trolling.

  4. Set The Record Straight says:

    If Fahy’s statement is “extremely erroneous” then you have clearly arrived at a figure of your own and compared it to the shortfall figure Fahy arrived at. Therefore, please tell me what (if any) the shortfall really was?

  5. Veebyes says:

    We won’t have to wait too very long to see who is going to be right. The numbers do not lie. They can be spun to fool the ignorant who do not understand anything financial further than the next paycheck however. Unfortunately these people represent the majority of the voting population.

    If Premier/Finance Minister Cox is proven wrong the honorable thing to do would be for her to resign both positions. In a modern democratic society this is what would happen. Alas, Bermuda is not. Given past habits of PLP politians involved in incompetence or unethical but not illegal behavior, don’t hold your breath waiting for the honorable thing to happen.

  6. Graeme Outerbridge says:

    So the game is splitting hairs about exact projections….a little honesty about the real bottom line would be refreshing by Ms. Cox. Instead she goes all lawyer on us with the truth. She could for example tell us the exact amount of Government debt without playing games about terminology. The Bermudian people are going to resist the Government trying to unload their spending mistakes on the Private sector^^

  7. Joe says:

    Simply put, I don’t believe her.

  8. David E. Chapman says:

    Mr. Outerbridge,

    I thought the Premier’s answers, at least from what I can read here, were quite clear. 1. No overdraft over $50,000,000.00. The collected revenue, which was $15 million or 3.5 % higher than the corresponding period in 2009/10 and 3. a release of a report on the accounts of the Consolidate Fund for the Fiscal Year 2009/2010 in February 2010. Simply put, as she points out, the BDA’s assertions were incorrect and based on an inaccurate assessment.

    If the report that is released in February 2010 shows items of concern, by all means lets hold the government to account. However, lets be accurate and give positive constructive feedback on the way forward.

    As to Veebyes, in the responses I read from you, you seem to constantly put Bermudians down, especially this one which you state that the majority of the voting public is financially ignorant. Its easy to hide behind pseudonyms when you speak like that. I applaud the BDA and the UBP when they attempt to hold the government to account, especially when they give positive constructive criticism but Bermuda definitely doesn’t need bigoted views like yours.

    • Veebyes says:

      DC, look around. Customs can’t find people who can do basic math skills. The Police, the Fire Service, any employer you might want to talk to. Non of them can find Bermudians that have the needed maths or english skills for anything over the simplest of jobs. Public education is a mess & no improvement is in sight. It has been this way for years. It produces ignorant people. They just don’t know. What is really disturbing is that they don’t know that they don’t know.

      Don’t attack me. I didn’t make this stuff up. Bermuda is just starting to get a reality check. We have had decades of prosperity, under that nasty UBP Government which got thrown out in 98 after leaving the Island “in such a mess” with a surplus in the current acct & a very modest debt. The days of skipping from job to job are gone. The days of working when you feel like it are gone. The days of getting a raise way over the inflation rate are gone. The days of high pay for unskilled labour are going fast.

      When our big neighbour to the west sneezes, we catch a cold. Well…many years ago the people of the US overpriced themselves out of jobs. Now jobs are valued, even if it tough to make ends meet. Bermuda will learn the same lesson or become just another poor 3rd world island.

      • News Flash says:

        Actions will speak louder than all the banter on Bernews. If a snap election is called for the spring of next year, then that will be all the confirmation we need that we have been deceived about our financial condition. If she does not call an election then perhaps (hopefully) we will be pleasantly suprised, and all this drama will end. But somehow I DOUBT IT.