NEW YORK (Reuters) - Puerto Rico’s tax revenue collection in July was ahead of projections, the U.S. commonwealth’s treasury secretary said on Wednesday, a positive start to the new fiscal year for an island struggling with bankruptcy and a 45 percent poverty rate.
“I think we are going to be $20 to $30 million over the forecast,” Raul Maldonado, said in an interview with Reuters on Wednesday while in New York meeting with legal and financial advisors to hammer out procedures for tax reform proposals.
“For July, we started the fiscal year already in positive territory because we are over the forecast. We have to close the books on the final adjustment but we feel we are over the budget,” he said.
The revenue collection forecast for July, the start of the 2017-2018 fiscal year, was $600.8 million, his office said.
In the prior fiscal year, Puerto Rico’s tax collections exceeded forecasts by $234.9 million, or 2.6 percent, to $9.33 billion. The main drivers for increased tax collection came from the foreign corporations excise tax, the Sales and Use Tax and the motor vehicle excise tax.
Maldonado, who is also the government’s chief financial officer, said each government department is required to freeze their spending and purchase orders at 95 percent of the monthly budget.
“I want to make sure that they don’t overspend. By freezing five percent I am creating a cushion so if there is any variance on a monthly basis we can address that. It is a hardline budget approach but it is a special time here,” he said.
In May, Puerto Rico filed a form of bankruptcy under the federal 2016 rescue law known as PROMESA. The island’s Byzantine capital structure has 18 public agencies owing a combined $120 billion in bond and pension debt.
The federally appointed financial oversight board created by PROMESA said on Wednesday it would investigate the U.S. commonwealth’s debt “and its relationship to the fiscal crisis.”
Maldonado said he was launching a centralized tax collection pilot program, with guidance from the U.S. Treasury Department.
Three large and three small municipalities have signed on to the test which will seek to increase tax collection efficiency while cutting bureaucracy in the 78 municipalities Puerto Rico’s 3.5 million U.S. citizens call home.
“We are going to submit the tax reform during August and we will include that option as an alternative to the municipalities,” he said.
Reporting By Daniel Bases; Editing by Andrew Hay