by Sampson Nanton
Finance Minister Colm Imbert has announced a $49.5 billion budget that will increase exemptions on Income Tax but also see a rise in the cost of importing motor vehicles and sometimes in fuel as subsidies on fuel at pumps are being completely removed.
Fuel suppliers will be allowed to set their own prices and the minister said it will mean that when prices are low, the cost will be lower but once world prices rise, gas prices will rise as well.
The State will provide the gas to the suppliers at prices it will announce at the start of each month. The government will also offer for sale to private owners, all gas stations controlled by NP.
Less Income Tax
Personal Income Tax allowances will rise from $72,000 to $84,000 per annum. It means that individuals earning $7,000 or less will be exempt from paying any income tax.
This measure will become effective in January 2021.
“This will put additional income of $3,500 in the pockets of over $250,000 individual taxpayers,” the minister told the Parliament in his presentation.
This will cost Government $750 million in income tax revenue but Minister Imbert said this relief will help stimulate demand in the economy.
Imported motor vehicle taxes
The minister announced the removal of tax concessions on the importation of private motor vehicles, which he said has resulted in a leakage of US$400 million each year.
Imported private vehicles will now attract Customs Duty, Value Added Tax (VAT) and other taxes from October 20, 2020.
The purchase of homes will become cheaper for new homeowners with the amending of the stamp duty threshold from $1.5m to $2m. This will save first-time homeowners up to $28,000 in stamp duty.
It will begin in January 2021.
Cigarette, luxury goods taxes
Taxes will be implemented on the use of cigarettes, with duties rising by 20 per cent from October 2020.
The government will also implement a 200 per cent rise in all penalties for the sale of alcohol and tobacco to minors from January 2021.
VAT of 12.5 per cent will be restored to luxury imported foods, including lobster, strawberry, champagne, apples, grapes and others. A full list will be published before it takes effect on January 1, 2021.
Freeze on employment
The minister announced a freeze in the filling of vacant posts within the Public Sector for the period of one year.
Taxes on digital equipment
All taxes on digital equipment will be removed. This will include mobile phones and computers and tax allowances of 150 per cent with a cap of $3 million will be available to businesses involved in technology.
Internet ‘MiFi’ devices – mobile hotspots – will be made available to 45,000 students who don’t have internet in their homes or surrounding devices. This will begin in the first quarter of calendar 2021.
A total of $50 million will be allocated to the acquisition of computers for needy students. This will be a joint effort between the ministries of
Education, Public Admin and Digital Transformation and Social Development and Family Services.
The Budget has been predicated on an estimated oil price of US$45 per barrel and a gas price of US $3 per mmbtu.
Total revenue is estimated to be $41.364 billion and expenditure has been put at $49.573 billion.
That amounts to a fiscal deficit of $8.209 billion.
The allocation to Tobago is $2.134 billion. That amounts to $1.916 billion for Recurrent Expenditure, $200 million for Capital Expenditure and $18 for URP.
Among other measures, the Ministry of Works and Transport will
be mandated to take steps to ensure the port of Port-of-Spain has a private sector operator by end fiscal of 2021.
The Government will allocate $500 million toward an agriculture stimulus package and will guarantee State-purchase of local content in agriculture.
The fast ferry, the ATP James, will arrive before the end of this month and will go in service before the end of December. It will carry 900 passengers, 250 vehicles and arrive in less than three hours.
In the energy sector, direct foreign investment is estimated to be US$2.2B for the upstream sector for calendar 2020 and US$2 billion for 2021.
The minister announced the existence of 220.1 million barrels in proved oil reserves and 99.7 million barrels in probable reserves.
Oil production is expected to rise from 60,000 barrels/day in 2020 to 80,000 by 2022.
Natural gas output is estimated to remain at 3.2bscf in fiscal 2020 and fiscal 2021. However, the minister said there is the existing capacity to provide 3.5bcf, allowing for the restart of chemical plants once commodity prices improve.
The Government will give the HDC a $1 billion loan guarantee. Existing homeowners will be encouraging to convert their arrangements to full mortgages.
Some 20 per cent of all state housing projects will be reserved for small and medium contractors.
Salary relief and income support grants will be extended to December 2020 for workers in creative and cultural industry.
The aluminium industry will be revisited.
Serious consideration is being given toward extending the retirement age to 65.
The Gaming Commission will be implemented to ensure that the government gets tax revenue from casinos and the Revenue Authority is expected to bring significant improvement in tax collection, reducing the tax gap by as much as $5 billion per year.
Property Tax will form part of new tax regime in 2021. It will start with residential properties and the minister assured it will be “fair and reasonable and not onerous burden”. Commercial and agricultural properties will follow.
The minister said the Budget deficit for 2020, which was forecasted to be TT$5.3 billion, will now be TT$16.8 billion.
He said the government withdrew TT$6 billion from the Heritage and Stabilisation Fund. The economy is expected to contract by 6.8 per cent in 2020.
However, he said inflation is expected to continue at between 1-2 per cent up to 2022.
At the end of September 2020, the country had US$7.3 billion in foreign reserves and US$5.7 billion in the Heritage and Stabilisation Fund.
The theme of the budget was ‘Resetting the economy for growth and innovation’.