February 10, 2014 / 3:30 PM / 4 years ago

UPDATE 1-Puerto Rico revenue dips in Jan; sales tax collection a record

NEW YORK, Feb 10 (Reuters) - Puerto Rico took in revenue of $664 million last month, $1 million less than in January 2013, while sales tax collection hit a record high, preliminary data from the island’s Treasury showed on Monday.

The U.S. commonwealth, which had its credit rating cut to junk-bond status last week by Standard & Poor’s and Moody‘s, has some $70 billion of tax-free debt outstanding and is struggling to overcome a chronic recession and a fast declining population.

The Treasury said in a statement that through January it had collected $4.6 billion in revenue since the current fiscal year began in July, a 13 percent jump over the same period last year.

“We continue to see the positive results of new tax legislation and administrative efforts as we implement our fiscal and economic development plans and work toward a balanced budget,” said Melba Acosta Febo, the island’s Treasury secretary.

The government has said it aims to balance the budget for fiscal year 2015. And after the S&P downgrade last week, Governor Alejandro Garcia Padilla said he would cut the current fiscal year deficit by $170 million.

Revenue from Puerto Rico’s sales and use tax swelled to $129.9 million last month, the highest level for any month since the tax was implemented in November, 2006.

The Treasury said January collections were used to complete a $643.7 million payment for so-called COFINA bonds, which are backed by tax revenues. Unlike Puerto Rico’s general obligation debt, the COFINA bonds still carry investment grade ratings.

Corporate tax collection rose 53 percent to $92.6 million, the Treasury said, while excise tax revenue on foreign corporations rose 4.6 percent to $142.5 million.

Individual tax revenue slipped to $175.3 million from $177.2 million a year ago.

Trading of Puerto Rico bonds picked up after S&P’s Feb. 4 ratings cut. The island’s general obligation debt dominated the market in the second half of the week with average yields far richer than any other security bought and sold in the secondary market, Municipal Securities Rulemaking Board data showed.

Puerto Rico deals exploded on Thursday, when commonwealth general obligation bonds maturing in 2020 were the most traded in the $3.7 trillion market, averaging a yield of 6.189 percent in 87 trades. A Puerto Rico general obligation bond maturing in 2041 was also the fifth most-traded that day, averaging a yield of 8.189 percent in 77 trades, according to MSRB data.

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