Treasury collections up 26% in July, manufacturing activity drops below acceptable threshold
The public and private sectors released sharply contrasting economic productivity reports Thursday that on the one hand claimed an increase in public revenue collections, while on the other denoted a significant contraction in manufacturing sector activity.
In its monthly report, the Treasury Department reported net revenue collections reached $561 million in July, the first month of fiscal year 2011-12, representing a 26 percent increase in General Fund income. The amount represented an increase of $116 million compared to the same month last year, Treasury Secretary Jesús Méndez said Thursday.
The bulk of the collections were attributed to excise taxes, which totaled $275 million. That figure includes the special tax levied on foreign corporations, although the agency did not reveal how much was collected during the last month of fiscal 2011.
Activity by foreign corporations, which are mostly manufacturing companies, showed a startling drop in July, according to the Puerto Rico Purchasing Managers Index report released Thursday. The document showed a result of 48.5; anything below 50 suggests a contraction in the manufacturing sector with respect to the prior month, the report showed.
“Three of the PMI sub‐indexes, new orders, production and employment, were below the threshold in July, after moving down from the previous month. The remaining two PMI sub‐indexes, suppliers deliveries and own inventories, were above the threshold, after moving up from the previous month,” the report stated. “The PRM‐PMI was at or above the threshold in 11 of the last 15 months since the survey began.”
The PRM‐PMI is a report generated through collaboration among the Puerto Rico Manufacturers Association, Scotiabank, and the Puerto Rico Institute of Statistics. The index measures short‐run business conditions in Puerto Rico’s manufacturing sector, and provides a broad‐based metric for the productive side of the island’s economy.
Income tax revenue down, IVU collections up
Treasury’s report showed that $238 million was collected in the form of income tax, which includes individuals and corporations, the agency said.
The figure represents a $91 million decrease compared to July 2010, which Treasury said is in direct correlation with the reduced tax rates as part of the Tax Reform implemented at the beginning of the year.
“The second phase of the reform continues to leave more money in the taxpayer’s pocket,” Méndez said. “Since January, contribution withholding tables for wages were reduced. This results in more discretionary income in the hands of the consumer, which results in incremental economic activity.”
Meanwhile, he said Sales and Use, or IVU, taxes yielded $92.3 million in August, besting August 2010’s results by 2.1 percent.
“Like last fiscal year, the first two months of the current fiscal year reflect higher revenue [collections] than last year,” the public servant said.
Finally, Méndez said the agency pumped $20 million of the motor vehicle excise tax collections into the Green Energy Fund, in accordance with Law 83 of July 2010. The fund has the goal of providing incentives to parties that establish renewable energy projects on the island.