A mixed Budget bag for another challenging year.
Freeze on public sector hiring, VAT on apples and so-called “luxury” foods, curb on vehicle importation, mandatory Property Tax information—and possible WASA and T&TEC rate hikes ahead.
But also: people earning $7,000 and less won’t be paying tax, free laptops and Mi-Fi devices for needy students and a slew of incentives to expand technology business and jobs for youths.
Plus plans to privatise the Port Authority operations and sell National Petroleum gas stations.
These were among plans which Finance Minister Colm Imbert announced in his 2021 Budget yesterday. In a three-hour-plus address to the Parliament, Imbert promoted his package.
“This Budget reflects our understanding of the requirements of our country for the medium-term to ensure that our economic recovery is as strong as possible,” he said during the Budget, themed “Resetting the Economy for Growth and Innovation.”
The package is meant to kickstart T&T to move on from the past fiscal year’s crisis caused by energy price shocks and COVID-19 pandemic costs.
Some immediate comments indicated the package wasn’t as bad as Government’s recent warnings on the economy had led people to believe it would be. Others, like UNC’s Vasant Bharath, said it was “lacklustre, nondescript, uninspiring and directionless.”
The 20201 Budget expenditure is set at $49.73 billion and revenue projected at $41.364 billion – both less than 2020 Budget levels. Imbert projected the deficit as $8.2 billion.
The Budget is based on an oil price of US$45 per barrel and a gas price of US$3 per mmbtu.
Imbert said 2020 was an exceptionally difficult year and the deficit for that was $16 billion—some $10b more than anticipated for that year. Financing of that deficit, just over $6 billion, has been withdrawn from the Heritage and Stabilisation Fund.
Education received the highest allocation in the Budget—$7.937 billion.
Tobago, where House of Assembly elections will be held in January, received $2.34b, slightly more than the $2.283 allocated in the 2020 Budget.
Imbert said 2021 is expected to be another challenging year but Government’s objective is to keep the economy stimulated and keep “as many people employed as possible. The longer the economy remained at rest, the longer it would take to get going.”
First among announcements, Imbert put the public on notice for collection of the Property Tax next year.
He said: “Government has been working assiduously to produce the required Valuation Rolls notwithstanding numerous challenges. To expedite the process and validate information on the Valuation Roll, the Commissioner of Valuation will in the near future be making mandatory requests of property owners under Section 29 of the Valuation of Land Act for the provision of information in an appropriate format.
“The objective is to commence the collection of Property Tax in fiscal 2021, starting with residential properties. We continue to assure property owners the rates will be both fair and reasonable and will not present an onerous burden on them. Taxation of commercial, industrial and agricultural properties will follow, in that order.”
In the Government sector, he said effective October 6, “we’re freezing the filling of all vacant posts in the public sector for one year.”
Other announcements he gave on T&TEC and WASA have prompted concern on possible price increases ahead.
On T&TEC, he said, “We consider that the upcoming tariff review should result in increasing levels of tariffs for electricity supply as being essential for enhancing investment and for ensuring a reliable distribution and transmission system.”
On WASA, Imbert noted a Cabinet Sub-Committee is now focusing on issues which are impeding the authority from meeting T&T’s needs.
“The committee will review WASA’s operations, including its unsustainable debt position, its ageing pipelines, its governance structure and the inadequate water distribution,” Imbert said.
“We envisage a report by November 30, which would include recommendations with respect to levels of investments adequate to the needs of an efficient water supply and we will take such decisions, including a tariff review, which are necessary for WASA to raise the water supply to our communities”
While Imbert announced no gasoline price hike, he confirmed a liberalisation of the fuel market from January 2021, when fixed retail margins for all liquid petroleum products will be removed. Petroleum retailers and dealers will be allowed to fix their own margins then.
He added, “Wholesale margins will remain fixed for the time being and an appropriate but reasonable tax will be introduced to compensate for the current fuel surplus that is generated on the sale of gasoline because of depressed oil prices.
“The net result should be little or no increase in the price of motor fuels at current oil prices. However, if the price of oil recovers, the price of gasoline and diesel will naturally increase proportionately.”
In this plan, Imbert also announced all NP gas stations will be put up for sale with first option to existing dealers.
To increase the VAT base, Finance Minister Imbert said the 12.5 per cent tax will now apply to luxury imported foods from January.
“… Such as lobster, escargot, smoked salmon, pâté, clams, strawberries, champagne, apples and grapes from January 1,” he said.
Imbert also announced moves to curb demand for purchase of new/used cars, which he said was costing T&T $2.5 billion per year in foreign exchange.
“To correct this unsustainable situation and suppress demand, as opposed to an outright prohibition, we propose to remove all tax concessions on the importation of private motor cars. All private motor cars will now attract customs duty, motor vehicle tax and Value Added Tax, with the lowest rates of duty and tax being imposed on hybrid cars, electric cars, CNG cars, and small engine cars below 1,500cc, to encourage their use. This begins October 20.”
But tax concessions will remain in place for commercial and industrial vehicles and public transport vehicles.
He added, “Further, in January 2021, the permissible age of imported foreign used cars will be reduced to three years and the quotas for the importation of used cars reduced by 30 per cent. A quota system will also be introduced for the importation of new cars in January 2021.
Imbert also announced increasing the personal income tax exemption limit from $72,000 to $84,000 per year starting January—those earning $7,000 a month or less will now be exempt from income tax. He said this will stimulate the demand side of the economy.
Along with initiatives to assist online teaching, Imbert said $50 million is being allocated to provide laptops for needy students.
In recognition of the fact that the creative sector is the last to reopen, Imbert said artistes will get a $5,000 grant. The Salary Relief Grant for other people will also be extended to December.
He announced a 10-year housing plan with offerings costing from a low of $250,000 to $1.5m for young upwardly mobile buyers.
Imbert also clamped down on cigarette usage. Noting T&T spends $500,000 per year to treat one lung cancer patient, he said, “We’re introducing disincentives to constrain smoking habits.”
Excise and customs duty on tobacco products will be increased from October 20. All penalties for selling alcohol and tobacco to minors will also be increased from January 1, 2021.
On plans to privatise the Port Authority, he said Government decided to adopt the approach with the Port retaining its regulatory and asset management functions, but with managerial, operational and financial responsibility for commercial activities – such as terminals and equipment in the port area—under a new investor.
“The Works Ministry will take immediate steps to rationalise by the end of fiscal 2021, the operations of the Port and introduce a private sector operator into the Port handling operations, leaving the ferry service to the T&T Inter-Island Company Limited.
Retirement age may move to 65
Finance Minister Colm Imbert painted an optimistic picture of T&T’s path and the energy sector.
But he said looking forward, “there is a high degree of uncertainty about our economic recovery and medium-term outlook. I’m in no doubt the full success of programmes and policies which I’ve just laid out would depend on our containment of the COVID virus; more so on a medical breakthrough with the availability of affordable, safe and effective vaccines.”
“But we’re assured that with firm and decisive management focused on the main elements of our economic programme, we will emerge in much better shape in 2021-2022,” he said.
Imbert said consideration will be given to extending the retirement age to 65 in proposed legislation to maintain the National Insurance Board and its facilities. He called for Opposition support for this legislation as well as for others on the T&T Revenue Authority, gaming sector, the National Statistical Institute, Procurement and Public Administration operations.
Imbert, who spoke from a plastic-shielded speaking booth – under COVID protocols- encountered Opposition cross-talk throughout his address. Opposition leader Kamla Persad-Bissessar will reply on his Budget on Friday morning.