Oct 2016 Financial News

Imbert spreads economic burden around.

Oct 03, 2016

Motorists immediately began spending more for diesel yesterday.

Smokers, drinkers and online purchasers will also be doing likewise—paying more—from October 20.

And a new “elite” tax for high income earners and companies will be implemented from January 2017, along with property tax for homeowners.

Finance Minister Colm Imbert announced these and other measures in his 2017 Budget—a $53.4 billion package, $10 billion less than his 2016 Budget—which he delivered in a three-hour address to Parliament yesterday.

Among the highlights was Imbert’s announcement of a reprieve on the controversial US Foreign Account Tax Compliance (FATCA ) issue. 

He said the US Treasury had informed Government that after sending the US a detailed explanation on its FATCA efforts, T&T is now “considered “to have a tax exchange agreement in effect with the US.”

“As such, T&T will not be subject to any immediate sanctions arising from our inability to meet the FATCA reporting deadline of September 30, 2016,” Imbert said, adding that full compliance is still needed. (See page 9)

Among revenue-raising measures for 2017, Imbert continued incremental removal of the fuel subsidy—which began in the 2016 Budget—increasing the price of diesel from $1.98 to $2.30 per litre. This became effective immediately and as Imbert concluded speaking in Parliament, prices at some gas station pumps were changed.

From October 20, excise duty on locally manufactured tobacco products will rise by 15 per cent and on alcoholic products by 20 per cent, he said.

“Government is of the view we need to curb consumption of alcohol and tobacco. It costs Government $500,000 annually to treat just one lung cancer patient,” Imbert explained.

On the introduction of the new high income earner tax, Imbert said, “As we make adjustments, it’s imperative we spread the burden of adjustment across the society. The burden cannot fall on just one group alone. The time is thus opportune to widen and deepen the tax net within T&T.”

The 30 per cent tax will apply to high income earners whose chargeable income exceeds $1 million per year. It will also apply to companies with chargeable profits also in excess of $1 million per year.

“This will be introduced on January 1, 2017, and will ensure that higher income individuals and corporations make an appropriate contribution to the fiscal adjustment effort,” Imbert added.

On the property tax which was to have been implemented in 2016, Imbert said legal advice was received that it was unconstitutional to collect property taxes using the old rates, since different rates applied in different areas of T&T.

“As such, the existing Property Tax Act will now be put into effect in 2017, with the population of the valuation rolls, minor amendments to the relevant law and other measures.”

He said new tax invoices will be issued in 2017 subsequent to completion of the valuation roll prepared by the Commissioner of Valuations and the assessment rolls done by the Inland Revenue Division. Every property owner is required to submit a return, which will be used by the Valuation Division to calculate the annual rental value, “failing which the division will prepare its own valuation,” he said.

Imbert gave the assurance that the law has exemptions for homeowners on the basis of their ability to pay.

From October 20 also, a seven per cent charge will be placed on online purchases that arrive in T&T through courier companies, or that are brought in directly by individuals via air freight.

Imbert said, “The popularity of online purchases has increased significantly over the past few years. Reducing the demand for these items helps to save on foreign exchange and to assist local industry. There are 31 courier companies registered and bonded in T&T and it’s estimated the value of packages cleared by these companies exceeds $1 billion annually.”

Among relief measures he announced for the least fortunate was that persons whose monthly electricity bill is $300 or lower will be exempt from the first $100 in electricity charges. This begins December 1, 2016.

The highest budgetary allocation again went to National Security ($7.7 billion), although it was 29 per cent less than its allocation last year. Next was Education ($7.3 billion), Health ($6.3 billion), Public Utilities ($3.3 billion), Works & Transport ($2 billion), Rural Development/Local Government ($1.9 billion), Agriculture ($766 million) and Housing ($664 million).

The Tobago House of Assembly received $2.354 billion.

Yesterday’s budget theme was “Shaping A Brighter Future—A Blueprint for Transformation and Growth.”

Imbert said the Budget continues the fiscal consolidation process geared to bring expenditure into better alignment with available revenues.

The 2017 deficit is projected at $6 billion and Imbert’s 2017 package is less than the 2016 Budget of $63 billion, which carried a deficit of $7.3 billion. 

The Budget was based on an oil price of US$48 and gas price of US$2.25 per mmbtu. 

The 2016 Budget was based on a US$45 price.

Government estimates 2017 revenue at $47.4 billion—$2.5 billion higher than for 2016. The 2017 figure includes estimated yield from the new tax measures.

Other revenue raising measures include sale of shares in First Citizens, TTNGL, Eteck and Trinidad Generation Unlimited, plus a proposed partnership for Lake Asphalt. 

Debate continues at 1.30 pm next Thursday with Opposition Leader Kamla Persad-Bissessar’s reply.

OTHER BUDGET HIGHLIGHTS 

• National talent search to encourage innovative business ideas to be evaluated by a panel of accomplished businessmen. Top five projects receive a $1 million grant.

• VAT exemption for foreign yacht repair services from 2017 first quarter.

• Government recovers $620 million from OAS on Point Fortin highway project; tenders for completion to be issued soon.

• Government savings bonds linked to purchase of housing and education.

• Tobago Sandals to inject into T&T’s economy over $500 million a year, creating 2,000 construction jobs over the two and a half-year construction period and 2,000 more jobs in the resort.

• Revenue Authority expected to earn first-year revenue of $100 million.

• NAPA now fit for occupation, work to start soon on President’s House, other heritage buildings

• Couva Children’s Hospital to become Couva Hospital and Training Facility.

• Gaming regulation for T&T, the only country worldwide with an openly thriving, unregulated gambling sector.

• Rationalisation of overlapping social programmes, restructuring of Cepep, URP.

FATCA reprieve comes 

Finance Minister Colm Imbert also explained yesterday that T&T had received a reprieve on the FATCA legislation.

“In recent weeks, there’s been considerable anxiety in the population over the unwillingness of the Opposition to support the Tax Information and Exchange Agreement Bill 2016, designed to make us FATCA compliant and to ensure local banks and insurance companies will not be subject to a 30 per cent withholding tax on US flowing from the United States into the local banking system, or vice versa, among other serious adverse consequences, such as the loss of correspondent banking. 

“This anxiety flows from a deadline for compliance which expires today. I’m now in a position to allay citizens’ fears regarding T&T’s inability to meet the FATCA reporting deadline of today, September 30, 2016.”

He said on assuming office in September 2015, they discovered a previous FATCA reporting deadline of September 30, 2015, was imminent, and had to scramble to quickly obtain an extension of time to avoid blacklisting of T&T. 

“We subsequently carefully reviewed our obligations under FATCA, confirmed the required policy, signed the inter-governmental tax information agreement with the USA and introduced the necessary governing legislation in early September 2016 to achieve compliance,” he said.

He said after it became apparent the Opposition wouldn’t support the tax bill, he communicated with the US Treasury to explain the situation. 

He added, “We gave the US Treasury a detailed step-by-step plan with respect to meeting our obligations under FATCA...I’m pleased to report the US Treasury has informed us that because we’ve signed the Inter-Governmental Agreement, demonstrated firm resolve to achieve compliance by seeking to enact the necessary governing legislation and we’ve submitted a detailed plan of action to achieve compliance with FATCA, we’re considered, as of now, to have a tax information exchange agreement ‘in effect’ with the USA. As such, T&T will not be subject to any immediate sanctions arising from our inability to meet the FATCA reporting deadline of September 30, 2016.”

However, he said the US Treasury will be monitoring T&T’s progress into 2017 and if it does not achieve full compliance by the next reporting deadline, T&T will be removed from the list of countries that have an Inter-Governmental Agreement in effect and subjected to the full brunt of the sanctions from FATCA non-compliance.

 

Source:
Gail Alexander
Trinidad Guardian
Saturday October 1, 2016

http://www.guardian.co.tt/news/2016-10-01/elite-tax-high-income-earners