In an interview yesterday, senior economics lecturer at the University of the West Indies, St Augustine campus, Dr Roger Hosein said the country’s fiscal deficit was likely to widen.
Hosein said his concern was that “by reducing VAT in a context of already lower property taxes could adversely affect the state’s fiscal revenue position.” Hosein said using Central Bank figures, if we compared what existed today with the 2006-2007 fiscal year, we were losing about $80 million a year in property tax. He said because there had not been much conversation in the manifestos about expenditure cutting, “the economy’s fiscal deficit can likely widen.”
On Friday, deputy political leader of the United National Congress (UNC) Dr Roodal Moonilal, delving into the PNM’s manifesto, said the removal of VAT on food items would cost the country $5.5 billion in revenue in five years. “Today they want to remove VAT and we have calculated if they [do that] we will forgo $5.5 billion over five years,” he said.
Hosein also said T&T stands to lose close to $5.5 billion in revenues over a five-year period. It should be noted that the 2014 estimate for VAT was $6,409,734,000, according to the Estimates of Revenue for the financial year 2015. But there was a decline in the revised estimates by $1,150,334,000. The 2015 estimate for VAT is $7,183,000,000.
VAT reduction is one of the many promises outlined in the PNM’s “Let’s Do This Together,” 44-page manifesto. VAT charged on goods in T&T is currently set at 15 per cent of the sale price.
VAT was introduced by the National Alliance for Reconstruction (NAR) under former prime minister ANR Robinson 25 years ago. It is applied to goods and services and is included in the final price of the product. The People’s Partnership (PP), on assuming office, removed the property tax and later removed VAT on over 7,000 supermarket items.
Rowley: There will be more efficient collection of VAT
PNM political leader Dr Keith Rowley, responding via text message yesterday, said the shortfall would be made up through more efficient and effective collection of VAT and that business owners would not be affected by the change. “They are simply required to collect the tax and pass it on to the Government.
“In fact, a lower tax benefits them a bit, since, in so far as VAT returns may be late, then they will have less money outside awaiting refunds.” Regarding the recalibration of machines by business owners, Rowley said he did not expect that to be a major issue.
Rowley said the 2.5 per cent reduction would also be made through the increased business activity which would flow from the re-establishment of confidence following a change of government to the PNM.
He said, “Our programme of activity also includes the early establishment of the Revenue Authority.” Asked whether the PNM had intentions to widen the VAT base to include the 7,000-plus zero-rated items removed from under VAT by the PP, he said, “We have given no consideration to that in these initiatives.”