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Trinidad revises taxes to deal with declining economy

Published:Friday | January 1, 2016 | 12:00 AM

Trinidad revises taxes to deal with declining economy

The Trinidad and Tobago government says it will restore the land and building taxes as of this month as well as revise the value added tax (VAT) regime as the oil-rich twin-island republic deals with an ailing economy occasioned mainly by overspending and a significant drop in oil prices on the global market.

Prime Minister Dr Keith Rowley, in a 30-minute radio and television broadcast on Tuesday night, said Minister of Finance Colm Imbert will also be seeking to collect arrears in taxes.

"We will ensure that our debt levels are sustainable over the medium term," Rowley said. "As far as is feasible, we will maximise the use of local dollars and projects largely driven by equipment and materials that are already within the country, (such as) housing, road construction and maintenance, agriculture, tourism and afforestation," he added, reiterating an earlier statement that his administration had no intention of seeking any financial package from the Washington-based International Monetary Fund (IMF).

He said the Ministry of Finance, together with the central bank, will monitor the country's debt profile, including the debt of state enterprises and statutory bodies, and ensure that the type of borrowing and the terms of the loans are consistent with a manageable debt profile, even with lower export earnings and reduced government revenues.

Rowley said his administration's ability to reduce government spending in fiscal 2016 has been severely constrained by the overhang of unpaid liabilities, settlement of negotiated wage increases and incomplete projects which must be finished and put to use.

"Towards this end, I have today instructed the minister of finance to direct the management of every state enterprise, statutory body and each ministry and the Tobago House of Assembly to review their operations and make identifiable adjustments of seven per cent reduction in proposed operating expenses, eliminating waste and/or inefficiencies not relating to job cuts at this instance," he said.

"We intend to use approximately $US1 billion for stabilisation purposes in financial year 2016, and perhaps another US$0.5 billion in financial year 2017. Using the Stabilization Fund will also help to finance the projected budget deficit and minimise increases in government borrowing," the prime minister said.

Rowley said the rationalisation of the VAT regime will take particular note of those items which may be included or must be retained in the basic list in light of these measures.

He said "this will cushion the effects of any increases in prices of basic food items. However, imported salt and fat dietary items, their local counterparts and luxuries will all be subjected to the full tax regime," he said, adding that the personal income allowance has already been increased in the national budget and this will give citizens in the lower-income brackets higher disposable incomes.

Rowley said the government will intensify its support to those who are vulnerable through the Ministry of Social Development, Education, the Children's Authority, the Tobago House of Assembly and the regional corporations.

"These will be tasked with monitoring those households in their communities which may be adversely affected and providing specific assistance in a timely fashion. Teachers will be tasked with heightened monitoring of the children under their care for signs of stress or difficulty arising from loss of employment by parents or guardians," the prime minister said.

He warned that if the country fails to adjust now, "we will find ourselves as we did in 1986 - with an economy with insufficient foreign exchange reserves and having to restructure our debt under a series of IMF programmes."