As the COVID-19 crisis highlighted the vast informal sector in T&T, Economist Dr Roger Hosein believes that one of the reasons companies stay informal is due to the high cost of doing business.
He has recommended that as something the Roadmap Recovery Committee should pay close attention to.
Hosein said one option that should be placed on the table when the Revenue Authority comes on stream is, “to encourage small firms to cross the border from informality into formality we would probably want to consider a lower tax rate, for example, for firms employing five or less people.”
In response to the suggestion by Dr Hosein for taxes to be implemented based of business sizes, Minister in Ministry of Finance Allyson West said that system was a thing of the past as it opened the door for increased tax evasion.
“So, for example, a business that should logically operate as a single entity may split itself in two so that each half can declare lower profits and pay tax at a lower rate than their combined profits would attract,” she said.
She added that she strongly believes that the informal sector needs to be brought within the tax net but that it has to be done by educating the people operating in that sector on the tax regime and on their rights and obligations under that regime.
Also addressing the issue, former Minister in the Ministry of Finance Mariano Browne said the focus should be on strengthening the administration at the already existing Inland Revenue Department.
“I am not going to get hung up on the basis of Revenue Authority or no Revenue Authority.”
He said the taxation issues will not miraculously go away with the proposed Revenue Authority.
He agrees with Dr Hosein that the government has to make it easier for people to do business and pay taxes.
For trade unionist Ozzy Warrick the concern lies with the workers in the informal sector.
He said many workers in this country work in precarious conditions, for example, month-to-month contracts, underpayment and little to no benefits. He explained that there is insufficient protection for them.
“So as long as we as a society accept more and more precarious work we will always have a problem with protecting these workers and also having these workers falling within the formal tax sector.”
Also giving his perspective on the matter, Chairman of the Tobago Business Chamber Martin George said businesses on the island support the Revenue Authority as they are willing to pay their “fair share of taxes.”
That being said, however, George said the government should immediately and unconditionally repeal the Foreign Investment Act and also seriously consider making Tobago a VAT-free zone.
He said these measures would give a tremendous boost to the economy in Tobago.
In its post-economic plan, the United National Congress recommended reducing personal and corporate income taxes, simplify the VAT regime, remove basic food items from the VAT net and improve the efficiency of the tax system by strengthening the Board of Inland Revenue, VAT offices and Customs and Excise.
But how the government plans to approach taxation moving forward after the pandemic will be guided by the Roadmap Recovery Committee set up by Prime Minister Dr Keith Rowley.
