PORT OF SPAIN, Trinidad, Oct 7, CMC – The Trinidad and Tobago government Monday presented a TT$53.03 billion budget to Parliament announcing increases in the minimum wages for daily paid workers as well as introducing a series of measures to boost production in the manufacturing, energy and agricultural sectors.
Finance Minister Colm Imbert in a presention last just under three and a half hours, told legislators that the fiscal package is based on an oil price of US$60 per barrel and a gas price of three US dollars per thousand standard cubic feet (mmbtu).
“For fiscal 2020 therefore, total revenue has been budgeted at TT$47.74 billion, up from TT$46.55 billion…from the estimated revised outturn in 2019. Total expenditure for fiscal 2020 has been budgeted at TT$53.03 billion, an increase of TT$2.53 billion over the fiscal 2019 outturn,” Imbert said.
He said the fiscal deficit for 2020 is expected to increase “marginally to TT$5.28 billion or 3.1 per cent of gross domestic product (GDP)
Imbert said over the past four years, the Keith Rowley government has been prudent in its economic policies regarding spending, and that he was proposing an increase in the minimum wage from TT$15 to TT$17.50 cents per hour and that the measure would benefit approximately 194,000 workers and would take effect from December 1, this year.
He also announced a 15 per cent increase in wages for workers and contractors aligned to the Community Environment Enhancement and Protection Programme (CEPEP), adding that daily paid government employees would also benefit from a pension plan that would soon be materialised when the relevant legislation is passed later this year.
“I propose to amend the Co-operative Societies’ Act to increase the current limit of TT$5,000 imposed on the transfer of shares or interest payable to a nominated beneficiary upon death of a member to TT$$50,000. This measure will affect take effect from January 1, 2020,” he said.
The government has also announced plans to increase the stipends for people within the “On The Job (OJT) programme” as well as increasing the intake to 8,000.
Regarding the energy sector, Imbert said the capital allowance for energy companies involved in exploration and development, which is currently 50 per cent for the first year, 30 per cent for the second year and 20 per cent for the third year would be changed.
“I propose to provide a capital allowance for exploration and development for both tangible and intangible expenditure to be computed on a straight-line basis over five years …at 20 per cent per year,” he said, adding that this measure will result in significant additional revenue for the government and will take effect on January 1 next year.
The Finance Minister said that in order to increase revenue derived from natural resources from companies engaged in the oil and gas exploration and development, he was proposing a reduction in the loss relief rate from 100 to 75 per cent of taxable profit, effective from January next year.
He also announced an increase the Investment Tax Credit for energy companies from 20 to 25 per cent “to stimulate further exploration and development-related investments in the energy sector.
“This increase will give companies the ability to claim 25 per cent of the expenditure on development activity for mature fields and enhanced oil recovery projects as a credit against their Supplemental Petroleum Tax Liability,” he said.
Government also said that in order to support the transition to LED lighting, it would remove all taxes and duties on LED bulbs and appurtenances as well as increasing the solar water heating equipment tax credit from 25 to 100 per cent of the cost of the equipment up to a maximum of TT$10,000.
Imbert also announced a ban on the use of Styrofoam and single-use plastics, saying that as an initial step he intends to ban the importation of Styrofoam for use in the food service industry and to require manufacturers of food containers to introduce additives to make their products biodegradable.
“In order to encourage behavioural change, I propose to terminate the use of plastic water bottles in Government offices and substitute them with coolers with filters. This measure will take effect on January 1, 2020.”
Imbert said that for some time the complexity of calculating the taxation of profits of life insurance companies has been occupying the attention of policy makers and stakeholders, including the Association of Trinidad and Tobago Insurance Companies (ATTIC).
He said the taxation of the long-term insurance business for an insurance company is calculated by the profits of the long-term insurance business derived from the investment of its statutory fund, noting “here in Trinidad and Tobago we have recently reformed the legislation under which life insurance companies operate and we have now completed the technical work relating to the taxation of life insurance companies in the light of the provision in the Insurance Act 2018 that the Statutory Fund be eliminated. “
He said with the Statutory Fund no longer available as a tax basis, he is proposing to put in place a new methodology to replace the existing basis for taxation of life insurance companies.
“The new methodology will have a minimal marginal impact on the tax position of insurance companies. It will be simple and quickly implementable,” he said, adding that the measure would require amendments to the Corporation Tax Act.
Imbert also announced plans to increase the value of personal goods that could be imported without incurring Customs duties from TT$3,000, which had been set in 2005 to TT$5,000 as of December 1 this year.
In addition, the government said that in an effort to keep up with international best practice and the ever-changing world of technology, it would eliminate arrival forms at airports here.
“The new system will rely on advance passenger information using machine readable passports and other appropriate technology. This initiative will significantly reduce the lengthy lines at our airports as it is aimed to improve the efficiency of Immigration and Customs. This new policy will take effect in 2020,” Imbert said.
The government said new measures would also benefit local manufacturers seeking to export their products to the Caribbean Community (CARICOM) market.
Imbert said the existing promotional expenses allowance allows for a maximum of 150 per cent of the amount actually expended for the purpose of creating or promoting the expansion of foreign markets for the export of certain goods and services.
However, this provision is not included for those countries within the CARICOM region and Imbert said he intends to extend the promotional expenses allowance provision to first time exporters into the CARICOM market.
He said also to further stimulate domestic agriculture, the government is removing all taxes and duties on all inputs and resources for farmers registered for agricultural purposes and make agriculture in all its facets, including processing of local agricultural products, a tax-free industry.
The Finance Minister said that when the Rowley administration came to power in 2015, it inherited TT$4.5 billion in Value Added Tax (VAT) arrears.
“In the face of very difficult economic circumstances, we have struggled with this burden since then. I now propose to put in place an appropriate framework within which the value added tax was originally established, to allow for the refund of VAT on a current and consistent basis.
“For this purpose, I propose to offer three billion dollars in the first instance, in interest bearing Government bonds to all eligible VAT-registered business to meet VAT arrears.
“Thereafter, I would ensure that VAT refunds are put on a current basis which would lead to regular cash flows for business investment, greater economic activity and the avoidance of the evasion of the value added taxes.”
Imbert said that the new VAT bonds will have a tenor of five years and bear interest at a rate of 1.5 per cent per annum.
“The bonds will be tradeable and transferable, to facilitate their use as collateral or to obtain cash, to stimulate business activity. Further details of this initiative will be provided in the Finance Act in December 2019,” he told legislators.
Debate on the budget will begin on Friday. – CMC