PORT OF SPAIN, Trinidad, Oct 5, CMC – Finance Minister Colm Imbert Monday presented a TT$49.5 billion national budget to Parliament viewed as a stimulus fiscal package overshadowed by the negative impact the coronavirus (COVID-19) pandemic has had on the economy of the oil-rich twin island republic.
“Prior to the advent of COVID-19, we were on the cusp of our economic recovery. The economy had been stabilised as macro-economic and structural reforms had begun to take root,” Imbert said, adding that the pandemic “has been an unprecedented challenge for our country, it continues to cause tremendous hardship, taking lives and jeopardising livelihoods both at home and around the world.”
He said when the virus was first detected here and the measures implemented induced a “sharp decline in economic activity and loss of jobs, although temporary in the first instance.
Imbert said that the fiscal package would be based on a price of US$45 per barrel of oil gas at three US dollars per mmbtu and that the allocation of resources reflects the objective to consolidate and to reset the economy for growth and innovation.
Imbert said that total revenue had been estimated at TT$41.36 billion, up from TT$34.9 billion, while expenditure is set at TT$49.5 billion, a decrease of TT$1.25 billion over the last fiscal year, but significantly lower than the peak expenditure of TT$61.93 billion in 2014.
The Finance Minister announced a raft of tax measures including a new income tax initiative that would allow for persons earning TT$7,000 a month to no longer pay income taxes.
“Madam Speaker as a huge fiscal stimulus to the economy and a fillip to the retail sector we are providing relief to working families by increasing the personal income tax exemption limit from TT$72,000 to TT$84,000 per year.
“”All individuals earning TT$7,000 a month or less will now be exempt from income tax. This will put additional income of TT$3,000 per year into the pockets of over 250,000 individual tax payers. This bold measure will cost the government TT$750 million per year…but we firmly believe that in this difficult COVID-19 period, it will stimulate the demand side of the economy by stimulating economic activity, consumption, sales and growth by putting more money in the hands of consumers.
“We believe that through the multiplier effect, the net effect on our GDP (gross domestic product) will be much more than TT$750 million. This measure will take effect on January 1, 2021,” Imbert said during his ner four hour presentation.
The Finance Minister also announced a freeze on public sector hiring for a year and that the small and medium enterprises will benefit from equity funding.
“We are providing a market for such enterprises on the Trinidad and Tobago Stock Exchange and we are doing so by amending section 2 of the Corporation Tax Act to allow for an increase in the incentive period from five years to 10 years,” Imbert said adding that there would be a full tax holiday in the first five years following listing on the Stock Exchange followed by a 50 per cent tax holiday for the next five years.
“By the time the tax breaks expire, firms would have grown into larger entities thereby contributing more to government revenue than they would have had they not received the financing they need at an earlier stage in their life cycle. This measure will take effect from January 1, 2021,” Imbert said. Announcing also tax concessions for creative and sporting activities.
In his presentation, Imbert also announced that in keeping with the government’s efforts to fully digitalise the economy, all taxes on mobile and digital equipment, mobile phones, software, computers, and accessories will be removed.
He said a tax allowance will be provided to businesses which invest in tech start-ups and new businesses, with the allowance set at 150 per cent with a cap of three million TT dollars.
A similar initiative will be provided for businesses that engage in technology solutions and digitalisation as well as those businesses that create employment, particularly for young people in the technology industry.
He said that the government would be providing a waiver on imported construction material for approved building projects, which start on or before December 31, 2022, there would be no value added tax (VAT) on the importation of building materials to be used exclusively in connection with the projects.
This tax measure would also be extended to approved tourism projects and will come into effect January 1, 2021.
Imbert said that there would also be a waiver of stamp duties for first time home owners and to encourage private sector to invest in residential housing development, the stamp duty would be amended from the current TT$1.5 million to two million.
“This measure will save first time home owners TT$28,000 in stamp duties and will benefit up to one thousand families per year,” Imbert said, adding that the Corporation Tax Act would be amended to assist property developers.
He said regarding importation of motor vehicles, the government is moving to rationalise the new and used markets for vehicles, complaining that “there are far too many cars on the road in Trinidad and Tobago.
“As a country we spent TT$2.5 billion a year, or US$400 million a year importing an average of 25,000 motor vehicles per year, at least two-thirds of which relates to private motor cars. This has created a serious leakage of foreign exchange and to correct this unsustainable situation and suppress demands as opposed to an outright prohibition, we propose to remove all tax concessions on the importation f private motorcars.
“All private motorcars will now attract Customs duty, motor vehicle tax and value added tax. The lowest rate of duties and tax being imposed on hybrid cars, electric cars and small engine cars below 1,500 cc to encourage their use”.
He said tax concessions will remain in place for commercial and industrial vehicles and public transport vehicles.
The government also announced it was removing all subsidies on fuel including diesel which had been spared that measure a few years ago, as well as increasing taxes on tobacco products.
He said he government would also increase by 200 per cent all penalties for selling alcohol and tobacco to minors as well as all other penalties under the Liquor Licenses Act, and the Tobacco Control Act.
Imbert said that the government is restoring the VAT base to its original conceptualization.
“It will now be broadened to include luxury imported foods. The full VAT of 12.5 per cent will now be applied to a wide range of imported luxury food items, such as lobster, escargot, smoked salmon, pâté, clams, strawberries, champagne, apples and grapes. The full list will be published in due course and will take effect on January 1, 2021,” he said.
Imbert said that the government expects that new digital economy, for which to establish we have set a tight time frame of two years, will generate a new and modern society.
“We expect in this process to establish a new type of management –one based on societal cooperation whereby all stakeholders collaborate across all sectors for the benefit of the country, including the requirements to contain vigorously the spread of the virus.
“The wearing of masks, social distancing, the avoidance of crowds and good hygiene must be accorded the highest priority in our day-to-day activities. Stay at home, stop the spread and save lives.”
Debate on the budget will begin on Friday.