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JM | Oct 13, 2021

Auditor General clears GOJ Fiscal Policy Paper for 2021-2022 1st Supplementary Budget

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Over-performance in Revenue and Grants for April to July 2021 found reasonable

Auditor General Pamela Monroe Ellis (Photo: Auditor General’s Department)

Jamaica’s Auditor General Pamela Monroe Ellis has cleared the Government of Jamaica’s Fiscal Policy Paper (FPP) for the 2021-22 1st Supplementary Budget, declaring that performances in revenues and grants are reasonable considering the circumstances.

Monroe Ellis’s clearance of the FPP comes after her examination of the document, which was laid before the Houses of Parliament on September 28, in accordance with Financial Administration and Audit. The Auditor General said she found that the report met the requirements under the Fiscal Responsibility Statement, Macroeconomic Framework and Fiscal Management Strategy.

According to Monroe Ellis, “the Interim FPP indicated an over-performance in Revenue and Grants for April to July 2021 relative to budget, reflected in Tax revenue, Grants and Capital Revenue. I found the explanations provided for these positive deviations from budget to be reasonable considering the circumstances”.

She cited for example, a disaggregation of Tax Revenue revealed better than budgeted performance for Production and Consumption and International Trade tax receipts. This was attributed to a relaxation of COVID-19 containment measures, higher volumes of imports and visitor arrivals, reflected in GCT, Customs Duty and Travel tax receipts, respectively.

Big jump in inflows from telecoms licences

The Auditor General highlighted the significant inflows from telecommunication licences, which were identified as responsible for the higher inflows from ‘Other licences’. This was complemented by the better than budgeted Grant inflows were credited to inflows from the International Bank for Reconstruction and Development (IBRD) to finance the catastrophe bond premium.

She noted the explanations for higher than budgeted receipts among these tax categories were consistent with the 12.9 per cent estimated Gross Domestic Product (GDP) growth by the Planning Institute of Jamaica. The FPP interim report attributed the better than budgeted inflows from Income and Profit to ‘Tax on Interest’ receipts but did not expound on the reasons or contributing factors for the increase in tax on interest.

In the context of the prevailing low interest rate, the Auditor General opined that “a more precise explanation of the over-performance of this tax category would have enabled greater transparency and clarity. In addition, explanations for the above-budget revenue collection from sub-categories such as Betting, Game and Lottery (24.2 per cent) and Telephone Call Tax (44.3 per cent) could have provided some clarity on performance in the context, where the Interim FPP reported COVID-19-induced disruptions in employment and other activity”.

She added that the Ministry of Finance and the Public Service subsequently provided explanations for major variations of indicators, which were not explained in the Interim FPP.

Recommendations from Jamaica’s Auditor General

To better understand these over-performances, the Auditor General is recommending that the Ministry should consider reporting on the performance of tax arrears collected relative to the budget, as this could provide greater transparency in terms of explaining revenue performance.

In addition she is suggesting that the government considering the ongoing effects of the COVID-19 pandemic on economic activity and travel and therefore the Fiscal Policy Paper should include a more robust assessment of the risks from existing Public Private Partnerships (PPPs) to the fiscal targets and the debt dynamics.

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