He’s not an amateur! - he’s a super amateur

Economic analysts are quite upset with the PL’s leader Dr Joseph Muscat for calling the Minister of Finance Tonio Fenech “an amateur”.  Dr Muscat was commenting on the outcome of the public finances for the first five months of the year, when he criticized Mr Fenech for his failure to meet the Budget’s targets and went as far as to say that, had Mr Fenech been working with a private company, he would have been axed.

Earlier, the Opposition’s spokesman on finance, Mr Karmenu Vella, had blamed the hugely increased deficit in the first few months of the year on uncontrolled recurrent expenditure. But the Ministry of Finance countered that the Leader of the Opposition “needs to understand that ... a substantial part of the government’s income, particularly income tax and VAT, is submitted towards the end of the year, and therefore the deficit appears to have widened”.

Who is right and who is wrong?  If it is, indeed, the case that a substantial part of the government’s income is earned towards the end of the year, then it is Dr Muscat and Mr Vella who are the amateurs. 

Analysis of the government’s accounts released by the NSO show that, over the last six years, revenue raised during the last quarter of the year has accounted for 28.3 percent on average of the government’s annual revenue.  The ratio has been pretty steady, ranging from a low of 26.9 percent in 2008 to a high of 29.8 percent in 2007.  Hardly “substantial”, as the Ministry claimed, but slightly higher than a straight pro rata of 25 percent.

On the contrary, it is recurrent revenue earned during the first five months of the year that has historically been substantial.  In fact, recurrent revenue as a proportion of annual revenue has averaged 35.9 percent over the past six years, ranging from a low of 35.1 percent in 2009 and 2010 to a high of 38.1 percent last year.  This is certainly more substantial than the last quarter’s takings.

This is further supported by an analysis of tax revenues.  Fourth quarter tax revenues have averaged 28.6 percent of annual tax revenues and 24.8 percent of annual recurrent revenues, but tax revenues earned in the first five months of the year have traditionally averaged 31.2 percent of annual tax revenues and 27 percent of annual recurrent revenues.

Lastly, tax revenues raised during the period January-May as a percentage of the budgeted annual tax revenues and as a percentage of the budgeted annual total revenue have been 31.8 percent and 27.3 percent respectively – almost bang on the six-year average.  On the other hand, recurrent revenue during the same period as a percentage of budgeted annual total revenue has been 34 percent, lower than the six-year average but not substantially so.

Based on this analysis, therefore, both Dr Muscat and Mr Vella stand accused of failing to describe the Minister of Finance as what he properly is, a “super-amateur” who does not even read the official figures.   Perhaps it’s because he does not believe them!