Among the items which Imbert mentioned as being removed from the VAT zero-rated list were rice (except parboiled and brown rice); flour (except all purpose and wheat flour); milk-including processed and tinned milk, UHT milk, condensed milk, flavoured and unflavoured milk and milk substitutes whether or not from animal origin and cream and cream creamers; bread (except white and whole wheat bread); cheese and curd (except cheddar cheese and rennet free cheese); fresh butter; peanut butter; table salt; salted butter; coffee; orange juice; mauby; tunas; tomato ketchup; biscuits; dairy spreads; yogurt and tea (whether flavoured or unflavoured, including herbal teas) Items which remain on the VAT zero-rated list include baby milk and baby milk substitutes; corned beef; sardines; smoked herring; toilet paper; yeast; baking powder; uncooked or unstuffed pasta; brown sugar; oatmeal and curry.The full lists can be obtained at the Finance Ministry’s website (www.finance.gov.
tt) and the Inland Revenue’s Divison’s website (www.ird.gov.tt).
In explaining the reasons for which foods remained zero-rated and those which are no longer zero-rated, Imbert said the list of zero-rated food items was reduced, “to include only those basic foods and other items which comprise a major share of the basic budget of the bulk of the population.” The Minister explained, “Non essential, non basic and luxury items have and will be removed from the zero-rated list.” Telling MPs that the zero-rated list is still being reviewed, Imbert added, “Any further changes to the list will be dealt with by the time of the mid-year review.” With respect to protecting lower income groups in the country, Imbert said it was more efficient to directly target persons in need rather than attempting to assist them through removing VAT on certain food items.
Imbert observed that the former People’s Partnership (PP) government, “ an ill-conceived attempt to reduce the cost of living” zero-rated approximately 7,000 food items in 2010. At that time, former government minister Vasant Bharath indicated the VAT on those items would be reinstated once domestic agricultural production was boosted.
Imbert further stated that, “the latest available data indicates that 64 percent of all sales are either zero-rated or exempt and 50 percent of all imports are not subject to VAT. He also disclosed that an International Monetary Fund (IMF) study done in 2012 showed, “we only collect 40 percent of the VAT that we could potentially collect.” The Minister explained that even as Government seeks to reduce the rate of VAT from 15 to 12.5 percent, this will not result in a decrease in the price of petroleum products. Imbert said the duty on petroleum products will be adjusted, “so the prices at the pump will remain the same as announced in the national budget.” When he presented the 2016 Budget in the House on October 5, Imbert announced an increase in the price of super gasoline from $2.70 to $3.11 per litre and an increase in the price of diesel from $1.50 to $1.72 per litre.” Imbert said increasing the threshold for VAT registry from $360,000 to $500,000 will reduce the number of VAT taxpayers by 1,300. He indicated this will ease the compliance burden on the smallest businesses in the country and lead to an improvement in VAT administration.
Explaining to MPs that, “VAT is meant to be a broad-based consumption tax that is simple to administer, while being a major source of government revenue,” Imbert said the because of thedisproportionate dependence on energy taxes, “successive govts in TT have deviated from the accepted principles of VAT.” He told MPs that, we currently have a VAT system with an extensive zero-rating of domestic supplies and one in which sizeable share of goods and services are VAT exempt.” In his address to the nation on December 29, Prime Minister Dr Keith Rowley said, “The rationalisation of the VAT regime will take particular note of those items which may be included in the basic list or must be retained in the list in light of these measures.
This will cushion the effects of any increases in prices of basic food items.” However Rowley added, “Imported salt and fat dietary items, their local counterparts and luxuries will all be subjected to the full tax regime.” In a statement on January 8 which indicated that the new VAT list would be released once it was laid in Parliament, the Finance Ministry said, “The reduction in the rate of VAT to 12.5 percent and the changes to the range of items, subject of VAT will become effective February 1, 2016.”