The Trinidad and Tobago Government last week Monday presented a TT$52.49-billion (one TT dollar = US$0.16 cents) budget to Parliament, announcing a slew of measures it said will help revitalise an economy hard hit by the novel coronavirus pandemic.
The Government said it has spent US$18.1 million on purchasing vaccines to date and that over TT$5 billion has been allocated for COVID relief. It said that 51,493 grants at value of TT$221.4 million have been given as food and income support to people who had lost jobs.
In addition, the budget makes provision for TT$200 million for COVID-19 relief and the sustained vaccination programme will continue into 2022 to meet the World Health Organization (WHO) target of 70 per cent as soon as possible.
Finance Minister Colm Imbert, in a near four-hour presentation, told legislators that the fiscal package contains “opportunities for all our citizens and, in the process, ensures success and prosperity”.
“We will consolidate our gains, complete our ongoing projects and …revitalise and transform the economy by implementing our recovery programmes to establish a modernised, competitive and resilient economy aimed at promoting inclusive and sustainable growth,” Imbert said,
He is promising to provide a supportive private sector environment for facilitating entrepreneurship, domestic businesses and foreign investment.
“We will continue to implement people-centred policies. We will continue to invest in digital technology to support every aspect of our economy, including the delivery of public services,” the finance minister said.
He said he expects real economic activity to contract slightly in 2021 as the non-energy sector is expected to contract at the same rate as the energy sector. Both are forecast to decline by one per cent, however the non-energy sector is expected to grow by 2.3 per cent in 2022.
Imbert is also predicting a 13 per cent energy sector growth next year and a return to fiscal surplus in 2023.
Imbert said that the budget had been developed based on oil and gas prices of US$65 a barrel and US$3.75 per 1,000 British thermal units (MMBtu).
“As a result of these assumptions, we anticipate the total revenue for 2022 will be TT$43.33 billion, and in order to maintain our economic momentum we anticipate that expenditure for 2022 will be TT$52.49 billion. The fiscal deficit will be TT$9.096 billion, just about 5.8 per cent of GDP (gross domestic product),” Imbert said, with the major allocations going to the ministries of education and health.
He said based on these assumptions, oil revenue is projected to be TT$12.64 billion and non-oil revenue TT$29.71 billion, with capital revenue pegged at TT$1.006 billion. He said the total expenditure, including net of capital repayments and sinking funds contribution, will amount to TT$52.49 billion.
Regarding the fiscal measures, Imbert said the Government will implement a reduction of five per cent in the tax rate for “significant exporters of local goods as part of the comprehensive suite of COVID-19 relief measures”.
“We will consolidate our gains, complete our ongoing projects and …revitalise and transform the economy by implementing our recovery programmes to establish a modernised, competitive and resilient economy …”—
He said the five per cent reduction would be for those companies whose annual revenue is more than half a million dollars. He said the measure, which is estimated to benefit more than 500 exporters, will cost the treasury in excess of TT$45 million annually and will remain in effect for the next three years, from January 1 next year.
The Government is also reducing, by five per cent, the tax rate for small and medium companies whose core businesses relate to technology solutions, digitalisation and construction and which businesses represent more than 50 per cent of annual revenues.
“It is estimated that if 1,000 small and medium companies utilise this measure they can each save TT$41,000 in taxes at a cost of an estimated TT$45.6 million in revenue foregone per year,” Imbert said, adding that the measure would also be in place for the next three years.
Imbert said to further accelerate Trinidad and Tobago’s drive towards digitalisation, the Government is proposing that new companies whose core businesses are technology and digitisation, would receive a 50 per cent tax exemption on the first TT$100,000 of chargeable income for the first year, and the first TT$$200,000 in the second year.
“This measure will take effect from January 1, 2022 [for] motivated companies to get involved in digitisation, and recognising that innovation is the key to increasing efficiency and effectiveness within any organisation, I propose to implement a research and development capital allowance to 40 per cent of expenditure incurred by companies engaged in research and development.”
The finance minister announced an increase limit from TT$25,000 to TT$30,000 on mortgage interest paid by first-time homeowners for five years with effect from the date of acquisition and that all customs duties, motor vehicle and value-added tax (VAT) will be removed on importation of battery-powered electric vehicles with an age limit of no more than 2 years from January 1 next year.
In addition, the Government is removing all VAT and customs duty on specified therapy equipment for hearing impaired, visually impaired, physical disability and there would also be the removal of all duties and taxes on all remaining computer hardware, software and peripherals that still attract taxes.
The finance minister also announced that old-age persons will benefit from a utility rebate increase from 25 to 35 per cent on bills TT$300 or lower and that several basic food items will no longer attract VAT.
The Government has also announced an increase in penalties for owners of overweight trucks on the nation’s roads, moving from TT$750 to TT$8,000.
Imbert said that the Government is moving to divest approximately 10,869,565 of its ordinary shares in the State-owned First Citizens Bank (FCB) so as to raise an estimated TT$550 million.
During the lengthy budget presentation Imbert said that the Government is anticipating higher energy revenue due to higher prices and more output.
Natural gas is expected to increase to 2.77bcf in 2022 and 3.37 bcf in 2023. Oil and condensate production is expected to rise to 64,000 barrels per day by end of 2021 and 86,000 daily next year.
The Government is also anticipating that bid round to include 11 deepwater blocks, 12 land blocks, 25 open water blocks.
Imbert said that a comprehensive review of the oil and gas taxation regime is soon to include petroleum profits tax, supplemental petroleum tax and royalty, relevance of suite of incentives, licensing regimes and production-sharing contracts to ensure motivation for bids and, at the same time, ensure citizens get their fair share of resources.