Finance Minister Colm Imbert will present Trinidad and Tobago’s most challenging budget on October 5, 2020.
The Minister of Finance announced the budget date yesterday in a news release, almost a full month ahead.
The release also stated the Ministry of Finance was in the process of asking business organisations, trade unions and other interest groups to submit recommendations on the fiscal measures and initiatives they would like to see in the 2020-2021 budget, “in the context of our current restricted financial circumstances”.
It said all recommendations would be given consideration.
Imbert also announced that the Ministry of Finance will host and broadcast a virtual “Spotlight on the Budget and Economy” on Monday, September 28, at the Hyatt Regency Hotel, Port of Spain.
This will likely be a “Covid budget”, coming against a background of Government having to spend billions more than it budgeted for in 2020 and a decline in taxation from corporations, as well as the population, due to the decrease in economic activity and jobs as a result of the pandemic.
Prime Minister Dr Keith Rowley had previously signalled agriculture would be given priority attention in Government’s economic thrust and would be allocated an additional $500 million (to its normal allocation).
Rowley during the election campaign promised to create a digital nation by 2022. He noted digitisation would be one of the mandates of his administration, especially in the light of the increase in virtual activity during the Covid pandemic.
The Government had established a 22-member “Road Map to Recovery Committee”, whose first draft has already been tabled in the Parliament.
Sources said the budget would attempt to incorporate some of the ideas in the Committee’s report.
During the campaign, Rowley also spoke of the need to have property taxation to assist in providing the services required for the management of communities.
Browne: Imbert not riding a strong horse
Mariano Browne, former minister in the Ministry of Finance and newly-appointed CEO of the Arthur Lok Jack Global School of Business, said the Finance Minister is riding a difficult horse.
He said the minister had projected revenue of $48 billion last year and would have received less than $38 billion. He said the shortfall would have been financed from borrowing, and a withdrawal from the Heritage and Stabilisation Fund (HSF) and received money from the National Investment Fund (NIF), but one has to distinguish between revenue and financing devices.
“We tend to show things as revenue which are essential financing devices,” he said, adding that the money from the NIF is a financial device.
“You cannot keep selling assets and treat it as revenue,” he added.
Browne said Government had several options for raising revenue. It could increase VAT from 12 per cent to 15 per cent, which is where it was hitherto.
“That should add about $1 billion to $1.5 billion, but it depends on what the GDP number is, so that is a very rough accounting,” he said.
He said Government could also take money from the HSF, “roughly $1.5 billion”.
“Between VAT and withdrawal from the HSF Fund, you talking about an additional $12 billion,” he said.
“It would really depend on the size of the revenue number, but from a fiscal position those are the two items that I think are going to take place,” Browne said.
He said a third possibility is that the Minister of Finance would unify the income tax rate, which is currently at 25 per cent for persons earning less than $1 million and 30 per cent for persons who make more than $1 million.
He said Government could unify the rate to 30 per cent for everyone.
These three measures could generate an additional $15 billion in revenue for Government, Browne noted.
“But it all depends on where his (the Finance Minister) revenue number is going to be, in terms of whether he uses those three triggers. But those are the three things that are available to him,” Browne said.
Asked about property tax, Browne said that tax was not really a source of income for the running of government. He said in a structured financial system this money would be earmarked for the provision of specific services, such as garbage collection services, which could cost between $300 and $400 million.
He said if his memory is correct, property tax is expected to generate $500 million. He said the whole government budgeting system was a “significant area of weakness”.
Browne said he did not see digitisation as a serious initiative. He said digitisation was “ongoing”. Saying that the country was digitising consistently, he said the digitisation initiative was another “feel-good idea”.
In terms of energy, Browne said the horse had bolted already. He said he expected there would be more closures in the energy sector.
He said the most realistic assessment of T&T’s situation came from Frank Look Kin (energy expert and former head of National Gas Company), who said the country is likely to face becoming a “swing producer”, producing only when the energy product is making money.
Browne also pointed out that at the time when energy revenues are down, Government has take-or-pay projects with PowerGen, InnCogen and TGU, “where we have to pay for whatever they produce”.
He said Government was also in a take-or-pay situation with water.
“There are some significant expenses that contractually they (the Government) cannot avoid,” Browne said.
He added that Government still has some VAT refunds to pay. He said the outstanding figure for VAT was $6.3 billion and even if Government paid $2 to $3 billion, it still owed $3 billion.
“When would that be paid?” he asked.
Browne also raised the issue of foreign exchange. He said Imbert indicated some weeks ago that Government may have to review its situation with respect to the foreign exchange situation.
But, Browne also pointed out that Rowley had indicated there would be no devaluation.
He stated that the minister was not riding a strong horse.