Puerto Rico FY 2012 General Fund collections exceed goal by $10M
Treasury Secretary Juan Carlos Méndez confirmed Wednesday that General Fund collections for FY 2012 ending June 30 reached $8.6 billion, exceeding the government’s goals by $10 million.
During a news conference at La Fortaleza, he attributed the favorable results to the Tax Reform’s positive effects — which granted $1 billion in benefits — the outcome of multiple strategies to crack down on taxpayers, and the modest economic upturn currently taking place.
“For the fourth consecutive year, our administration is exceeding the General Fund collections estimate goal. This is the result of the prudent, responsible and realistic fiscal policy that we have implemented since 2009,” he said.
The preliminary General Fund FY 2012 net income estimates were $502 million or 6.2% more than the previous year. ”
Collections by revenue source showed mixed results in comparison to the prior year. Total income tax revenue, including both individuals and corporations, totaled $4.5 billion, some $369 million less than last year, which is largely attributed to the effect of the Tax Reform.
Individual contributions to the General Fund decreased to 24.7 percent in FY 2012 from 34.3 percent in FY 2009. Furthermore, Puerto Rico residents 65 and older have received $104 million in new benefits.
“The Tax Reform is having the desired effect, by leaving more money in taxpayer pockets and stimulating the economy, which in turn increases revenue,” Méndez said.
The government’s coffers also benefited from the special excise tax on foreign corporations put into force by Law 154 contributed $1.8 billion.
Meanwhile, excise taxes on alcohol and motor vehicles reached $286 million and $407 million, respectively, he said.
The collections related with alcohol sales represented a $5 million year-over-year increase, and represents the highest level for the category since FY 2007, he said. On the other hand, motor vehicle excise taxes jumped by $43 million over FY 2011, of which the government will earmark $20 million for the Green Energy Fund.
Sales and Use tax collections rising
During the news conference, Méndez explained that sales and use tax (known as IVU) collections totaled $1.1 billion, representing a 3.1 percent year-over-year growth.
“For the last quarter of Fiscal 2012 (April to June), the average increase was 5.5 percent. In fact, in July the increase was 7.7 percent, which is attributed to improved economic conditions for consumers and the outcome of control efforts, such as the IVU Loto, to increase tax collections,” he said.
Measuring IVU collections has become a key issue for Treasury, which through its Office of Economic and Financial Affairs Department developed an indicator to periodically measure the incoming revenue.
Preliminary results of this indicator show that there was an increase of 5.2 basis points when comparing fiscal year 2012 to 2009. The 55 percent jump in IVU revenue collections in FY 2012 is attributed to the agency’s stricter oversight efforts, Méndez said.
IVU collections have been under scrutiny recently, as they feed the Puerto Rico Sales Tax Financing Corporation, known as COFINA, which in turn is used to back government bond issues. On July 17, Moody’s Investors Service seemingly blindsided the government by downgrading $16 billion in COFINA bonds, basing its decision on what it believes is an increased risk in the bonds’ escalating debt service.
The administration took exception with the New York-based credit agency’s decision, firing off a letter two days later.
On Wednesday, Méndez said the government had shared its projections with Moody’s “telling them that the results of the control initiatives would be evident during the last quarter, and it happened.”
“These initiatives take some time to mature and translate into revenue collections,” he said.