KINGSTON, Jamaica –Hurricane Melissa has exposed vulnerabilities in Jamaica’s tax base, prompting the Government to sharply revise down revenue projections despite years of strong headline tax performance, according to an assessment by the Independent Fiscal Commission (IFC).

The Government has cut its tax revenue forecast for the 2025/26 fiscal year by $80.5 billion, the IFC said, with the tax-to-GDP ratio now expected to fall to 24.9 per cent, reversing earlier gains.

Before the hurricane struck in October, tax collections had been expanding steadily. In the first half of the fiscal year, tax revenue grew 6.9 per cent year on year, supported by strong domestic activity and robust tourism-related inflows.

However, the IFC said that performance was highly concentrated and largely cyclical, leaving revenues vulnerable to sudden economic shocks.

The commission noted that pre-hurricane outperformance was driven mainly by higher receipts from the contractors’ levy and stamp duties, both closely linked to construction and property activity. By contrast, more structurally stable revenue sources underperformed, with taxes from bauxite, dividends and self-employed individuals falling below projections.

When Hurricane Melissa disrupted tourism, construction and business activity, those weaknesses quickly became evident, feeding through to lower tax collections and forcing the government to reassess its revenue outlook.

The IFC also flagged Jamaica’s reliance on one-off and non-tax inflows, including airport securitisation proceeds and disaster-related payouts, as a complicating factor in revenue planning. While such inflows provide temporary support, the commission said they do not substitute for a diversified and resilient tax base.

“Revenue performance prior to the hurricane masked underlying concentration risks,” the IFC said, noting that shocks to tourism and construction have an outsized impact on fiscal outcomes.

The hurricane caused an estimated US$8.8 billion in damage, equivalent to about 41 per cent of GDP, and has increased spending pressures linked to reconstruction and social support.

The IFC warned that with rebuilding expected to boost imports and strain the external balance, revenue recovery may lag expenditure needs over the medium term, adding pressure to fiscal management.

Jamaica’s experience, the commission said, underscores the challenges faced by small, open economies where periods of strong growth can inflate revenues in ways that are difficult to sustain once conditions deteriorate.