Puerto Rico revenues surpassed projections and employment figures suggested more people were working.
Net general fund revenues beat Oversight Board’s predictions by 20.4% in the first quarter (July through September), the Puerto Rico Treasury Department announced Monday.
“These results are consistent with what other economic indicators reflect, such as retail sales, automobile sales (40.5% year-on-year growth in September) and payroll employment, among others,” said Secretary of the Treasury Francisco Parés Alicea.
Net general fund revenue was up 14% from the same period in fiscal 2022, partly as a result of excise tax on crude oil, gasoline and diesel now going to the general fund when in prior years it went to the Highways and Transportation Authority. Excluding this, net general fund revenue grew 6.5% from a year earlier.
Part of the growth in revenues was due to inflation, particularly with regard to the sales and use tax revenues, said Heidi Calero, president of H. Calero Consulting Group.
The Law 52 tax on foreign corporations, which replaced the Law 154 tax, brought in 24.1% more revenue in the quarter than the old tax brought in in Q1 2022.
The tax categories which brought in the highest revenues were corporate income ($769 million), individual income ($551 million), sales and use tax ($389 million), and the other category ($369 million). The categories that most exceeded the first quarter of fiscal 2022 were corporate income ($185 million over), other (which includes the newly added gasoline tax, $175 million), and the tax on non-resident earnings ($132 million).
The categories that exceeded the Oversight Board’s predictions by the largest amount were corporate income ($179 million over) and motor vehicles ($83 million).
Separately, employment increased 1.1% on a monthly basis in October and 1.3% on an annual basis, according to the U.S. Bureau of Labor Statistics household survey, released Friday. The number of unemployed dropped 2.8% from September and 2.96% from a year earlier. The unemployment rate declined to 5.8% in October from 6% in September and October 2022.
Nonfarm employment was up 0.3% from September and 2.6% from October 2022.
Calero said it is best to compare the employment figures for several months with similar figures a year earlier. If one compares the average employment over July through September with that of a year earlier, employment rose, but so did the number of unemployed.
Puerto Rico Electric Power Authority bondholders look at Puerto Rico revenue and economic reports as a bellwether of the island’s economy and electricity demand, which supports their bonds. Holders of restructured Puerto Rico general obligation and Sales Tax Financing Corp. (COFINA) bonds look at these indicators to help determine the value of the bonds on the secondary market.
The board has voiced concern about a proposed tax cut Gov. Pedro Pierluisi is considering as too threatening to revenues.