July 11 (Reuters) - Puerto Rico's revenue rose 5.5 percent during fiscal 2014 to end the year at $9.037 billion, which was still $488 million below the U.S. territory's budget estimates, according to a preliminary report released by its treasurer on Friday.
Because the territory made larger spending cuts than were budgeted, the deficit was actually smaller than originally estimated, said Treasury Secretary Melba Acosta Febo.
The revenue increase provides a slight break in dark financial clouds that have gathered over Puerto Rico in recent months.
Earlier this year all three rating agencies cut its credit score to "junk" on liquidity worries, prompting Puerto Rico to bring $3.5 billion of bonds to market in the largest municipal junk sale in U.S. history. That did little to help its high debt load or ease economic and population declines.
Now, the $3.7 trillion municipal market is worried the island or its authorities will default or restructure debts. The tax exemption in every state for interest on Puerto Rico bonds had made the debt highly appealing to investors over the years.
The bump in revenue was mostly due to corporate income tax collections, according to the treasury estimates. In the fiscal year that ended on June 30, they rose 49 percent to $1.914 billion.
The excise tax on foreign corporations increased 17 percent from fiscal 2013 to $1.902 billion and was the third-largest source of revenue for the commonwealth. The tax has been labeled a "backdoor bailout" from the federal government by some because corporations can take credits on their federal taxes for it. In fiscal 2014 the territory raised the tax's rate.
The largest revenue source, individual income taxes, dropped $75.2 million from fiscal 2013 levels to $1.979 billion.
Total Sales and Use Tax collections reached the highest annual level in Puerto Rico history, $1.242 billion. The tax was extended to some business-to-business transactions last year, providing a boost, and will be levied in the island's ports starting in August.
The collections were roughly split, with $644 million going to the island's sales tax financing corporation, known as COFINA, for debt service, and $595 million deposited into the general fund.
COFINA is generally considered a safer credit, but its ratings were cut earlier this month after the territory created a bankruptcy-like process for its struggling public authorities.
In the current budget the first $670 million in SUT revenue will go to COFINA.
According to the treasury, total collections missed estimates because gross receipt taxes came in lower than expected.
Gross receipts were made part of the alternative minimum tax calculation last year and, in turn, were affected by tax credits. In the current tax year they will not be part of the calculation, the department said.
(Reporting by Lisa Lambert in Washington; editing by Dan Burns and Matthew Lewis)
By Lisa LambertPuerto Rico revenue up 5.5 pct in fiscal 2014 -estimates
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