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ECONOMIC TRANSFORMATION: TT Government says Budget is part of Strategy to Transform Economy

Finance Minister Winston Dookeran said that while the local economy remains resilient and the financial system is strong “our national economy is still at risk and remains vulnerable to external shocks”.

He insisted that it was necessary for the oil-rich twin island republic to “stay on course in this time of uncertainty”.

He told legislators that the  budget was based on an oil price of US $75per barrel and a gas price of US $2.75 per mmbtu and that the Kamla Persad Bissessar led-five party People’s Partnership coalition estimates a real gross domestic product (GDP) growth of 1.7 per cent and an average inflation rate of seven per cent.

“The total revenue is projected at TT$47 billion (US$7.8 billion) comprising $18.1 billion (US$3.01 billion) from the energy sector and TT$28.9 billion (US$4.81 billion) from the non energy sector.

“Total expenditure is projected at TT$54.6 billion (US$9.1 billion) resulting in a fiscal deficit of $7.6 billion (US$1.26 billion) or 4.89 per cent of our GDP. The debt to GDP ratio remains sustainable and well within international benchmarks,” he added.

Dookeran, a former Central Bank governor here, said that with regards to the financing of the deficit, “we estimate that 52.7 per cent of the financing requirement will be met from domestic sources, while the remainder will be sourced from external sources including multilateral financial institutions.

“Our government and leadership shall remain firm in our resolve to transform the economy, and in concert with the people of our nation, we have the confidence to create more jobs, achieve a safer environment and increase our investment for the development and benefit of all our citizens.”

In outlining the fiscal measures to support the “broad and specific policies” outlined in the budget, Dookeran said that the government would provide incentives for small and medium sized businesses (SMEs) to access the Stock exchange since they are better served by raising capital on the domestic capital market.

“For too long they have been relying on high cost commercial finance which has limited their viability and expansion. In our efforts to assist the SME sector and at the same time strengthen the domestic capital market we are proposing to encourage them to access the facilities provided by the Trinidad and Tobago Stock Exchange (TTSE).”

He said SMEs with a minimum capital of five million (US$833,330) will be able to list on the TTSE provided that they have at least 25 shareholders, holding at least 30 per cent of the share capital which must not exceed TT$50 million (US$8.3 million).

He said to encourage such development, the Corporation Tax Act, will be amended to provide for a reduced Corporation Tax at a rate of 10 per cent on taxable profits, for the first five years of operations.

He said there would also be an expansion of the Deposit Insurance system which he described as an important component in the financial system for protecting depositors.

He said there would also be a broadening the Social Security net as the government seeks to introduce changes that will be of significant benefit to the elderly, and at the same time contain the rate of growth in expenditure for retirement income in the fiscal accounts.

“We seek to accomplish these goals by the provision of …a minimum guarantee monthly retirement nsion, with the minimum national insurance retirement pension will be increased to TT$3,000 (US$500) per month during fiscal year 2012.”

He said there would also be an increase in the insurable monthly income under the National Insurance… from TT$8,300 (US$1, 383) to TT$10,000 (US$1666).

“This will help to fund the increase in the minimum guaranteed pension indicated above. This measure will take effect during fiscal 2012, “ Dookeran said, adding that another measure would be to simplify the national insurance benefits.

He said the government would also engage in discussions with the National Insurance Board to ensure provision of support to persons who may encounter challenges in complying with the requirements of theNational Insurance System by virtue of their age or income.

Dookeran said that the government was also proposing a waiver on the payment of penalties and interest on outstanding contributions to the National Insurance Board.

“The proposed waiver is to be applicable until June 30th, 2012, provided always that all outstanding contribution payable by the employer to the board are paid before the expiry of June 30, 2012,” he said, adding that the waiver shall only be available to employers, who are registered with the Board before October 10, 2011, in respect of penalties and interest on contributions for insured persons registered as their employees prior to October 10, 2011.

Dookeran said that  the waiver only applies to penalties and interest payments which accrued before October 10, this year.

The Finance Minister said that the government would also be introducing new measures within the energy sector including new petroleum licences in an industry that “continues to be the main driver of government revenues and exports.

“The expansion of this sector remains critical for ensuring the long- term growth of the economy,” Dookeran said, noting however that the administration of the industry must be efficient and effective if the country is to benefit from it.

He said the licensing regime, which is the legal framework for administering and regulating petroleum operations, has remained unchanged since 1969 and as a result “we shall raise from $4,000 (US$666) to $40,000, (US$6666) the fees for” at least eight categories including an exploration  and production licence.

Dookeran said that the retail transactions at petrol filling stations have been increasing at a rapid rate and as a result “we are proposing that the annual licence fee for each gas station be now based on the annual total sales of all grades of gasoline and diesel for the immediate preceding year.

There will also be new licence for the transmission of natural gas, which will be based on the carrying capacity of the pipeline and an adjustment will also be made to the fees with respect to licences in respect of servicing, marketing or consumer refueling of compressed natural gas.

He said the new fees relating to marketing licences for gas stations, peddling operations and CNG service, marketing and consumer refueling operations, licences for transportation of liquid petroleum product and pipeline licences will take effect from January 1st next year.

The Finance Minister said there would also ne increase in the penalties for breaches committed under the provisions of the Petroleum Act .

“ Any person who contravenes section 6 (2) of the Petroleum Act shall be liable to a fine, on summary conviction, of TT$300,000  (US$50,000) – up from $30,000, (US$5000) and in the case of a continuing offense, a further $5,000 (US$833) per day – up from $1,500 (US$250) while the offense continues.

“ Any person who contravenes the rules or regulations under section 29 (7) of the Petroleum Act shall be liable to a fine, on summary conviction, of $150,000 (US$25,000) up from $15,000, (US$2, 500) and in the case of a continuing offense, a further TT $3,000 per day (US$500) up from TT$300 (US$50) while the offense continues.”

Dookeran said the provision of subsidies is an important strategy for containing transportation and energy

costs of the industrial and agricultural sectors. The cost to the country could be as much as $3.5 billion  (US$583 million) annually depending on oil prices.

“This subsidy has been subject to abuse,” he said adding that a person caught in such illegal activity at present pays a fine of $10,000 (US$1, 666).

He said a grading system of penalties has now been introduced with persons paying from as low as TT$150,000 (US$25,000) to three million dollars (US$500,000).

“We also propose to raise the fine for persons who fail to pay the levy for the purpose of subsidizing the product prices from TT$10,000.00 (US$1,666) to $100,000 (US$16,666) and in the case of a continuing offence from TT$200.00 (US$33) to TT$ 2,000.00 (US$3300for each day the offence continues.

“In addition, the fine for a person who contravenes the Act or Regulations in general will increase from $1,000.00 to $10,000.00. These fines under the Petroleum Levy and Subsidy Act will be effective at the coming into operation of the Finance Act 2012,” he said.

During his presentation Dookeran also announced plans to provide incentives for the alternative energy sector including tax incentives and a reduction in import duties.

He said while efforts to evade payment of the Value Added Tax (VAT) system continue unabated, the government intends to “take deliberate steps to deter this action by increasing the penalties for breaches of the VAT legislation”.

There will also be amendments to the Betting Levy Board Act, with Dookeran pointing out that “our search shows that levies collected from betting establishments do not reflect accurately the earnings generated by pool betting offices in Trinidad and Tobago.

“The financial support and funding provided by the Betting Levy Board for the development and improvement of the local horse racing industry is therefore is severely compromised. We propose to establish a robust monitoring system to determine accurately the earnings of these operations.

“We therefore propose to increase the penalty for contravention of the licence requirement from $50,000 (US$8, 333) to to $250,000 (US$41, 666).

 He said further instances, where the licensee of a licensed betting office fails to pay the levy, the fine payable on summary conviction will be increased from $50,000 to $250,000.

“In addition, we will be bringing to Parliament the long pending regulations to the Betting Levy Board Act which will provide the necessary legislative muscle to ensure effective compliance.”

 

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