Come better on gas taxes

While Junior Finance Minister Conrad Enill’s disclosure on Thursday that Government had completed the new oil tax regime promised in last year’s Budget is welcome, the news that Government has not yet completed the new gas tax regime is cause for concern. Only four weeks ago, Minister of Energy, Eric Williams,  had advised that a projected June date for the new oil and gas tax regime was no longer viable.  Enill, who made his statement a week ago, having updated the position with respect to the oil tax regime, could only add that Government was working on revising the taxes applicable to gas.

Additionally, Enill declared that Government had completed revising its Value-Added Tax (VAT) regime and was working on revising the tax regimes for personal income and corporation taxes. The Junior Finance Minister has indicated that Cabinet, which has the report on the oil tax structure before it, needs only to decide on the date on which it would be taking the new oil tax measures to Parliament. The presentation of both the new oil tax regime and that of natural gas would have greater impact, however, should they be taken to Parliament at the same time. Admittedly, any announcement of fundamental changes in personal income tax and corporation tax rates is normally reserved for Budget Day. 

We should not like to believe though, regardless of perceived impact, that what Government may have in mind is a reserving of the announcement of the new gas tax regime for the Budget Speech. The country has waited long enough for the new energy tax regimes, and although they can be implemented retroactively, as there is precedent for this, the sooner Government does this the better for the country.  But it will not be enough for Government to announce that new energy tax regimes have been put in place, it should provide an insight into the tax structures, how they compare with those of major energy producing countries, and how much Trinidad and Tobago is expected to receive in taxes at the present as well as anticipated rate of production.

In addition, given the relatively short life expectancy of our proven reserves of natural gas Government should consider seriously encouraging member states of the Gas Exporting Countries Forum to adopt an OPEC-like approach with respect to pricing. When Prime Minister and Minister of Finance, Patrick Manning, announced in his 2004/2005 Budget Speech the plan to revise the energy tax regime, he had emphasised that “notwithstanding the significant increase in the price of oil, the tax accruing to this country from our hydro-carbon resources was considerably less than expected.” An OPEC-type strategy on gas and a meaningful upgrading of our tax structure for oil would ensure that this position changes with respect to energy overall.