2019/20 Budget Communication Final Budget Communication | Page 47

On the revenue front, we note that the revenue yield of our taxation system amounted
to some 18.8 percent of GDP in 2018/19. A number of factors are expected to contribute to a
further enhancement of that yield in 2019/20 and beyond.
In 2019/20, the Revenue Enhancement Unit will be fully established, thus securing a
significant increase in annual revenue and thereby underpinning a further boost in the revenue
yield. Additionally, VAT will be reported at the 12 percent rate for a full year for the first time
since the rate increase, and the new tax agreement with the gaming houses will be fully
implemented. As such, we expect to secure higher receipts for the Government accordingly.
Moreover, the new Electronic Single Window at the Customs Department, with its enhanced
features, is intended to secure more revenue via the Click2Clear platform, some of which will be
realized in the upcoming fiscal year. All told, this should translate into an increase in the revenue
yield of the tax system to the area of 19.8 percent of GDP in 2019/20 and beyond.
As such, we have budgeted for total revenue of $2.628 billion in 2019/20, which
represents a $215 million increase over the projected outturn in 2018/19.
Recurrent expenditure is budgeted at $2.530 billion, equating to some 19.0 percent of
GDP. That represents an increase of $95 million over this year’s projected expenditure. With
regard to the payment of arrears, we currently project that we will pay an additional $100.4 million
toward the $360 million buildup we met when we came to Office two years ago.
While the Government continues to make good progress in settling the outstanding
arrears, the level remains a significant percentage of outlays in the upcoming fiscal year. One
important obligation yet to be factored into future arrears payments is the requirement for the
Government to meet obligations relative to the BTC legacy Defined Benefit Pension Plan, based
on the terms of the Shareholders' Agreement between the Government and Cable & Wireless
Communications.
It has been determined that the Government never provided the $39 million to the
Feeder Trust that was created to assist in meeting its obligations to the Plan, when the corporation
was sold to Cable and Wireless for $210 million in April 2011. To commence meeting these
obligations, the Government has provisioned $3.0 million in the FY2019/20 budget and over the
course of the year will seek to devise a multi-year comprehensive strategy for settling the balance,
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