Government will now focus on revenue collection and intensify its efforts to improve tax administration and compliance for the rest of fiscal 2017 and beyond; and the sale of assets. He confirmed the establishment of a Revenue Authority by the end of the fiscal year.
“We need to see a quantum leap in the performance of our revenue collection agencies as soon as possible, since there is no doubt that tax leakage and tax avoidance is widespread,” he said, “resulting in a loss of revenue to the Treasury in the billions of dollars.” In the mid-year review of the budget yesterday in the House of Representatives, Imbert said, the 2017 budget was predicated on an average oil price of US$48 per barrel and a natural gas price of US$ 2.25 per mmbtu.
In the first six months of the fiscal year, he said, corresponding prices have averaged US$50.45 per barrel and US$3.30 per mmbtu respectively.
“We have therefore increased the expected tax collections from the energy sector for 2017 to $3.6 billion, compared with the original budget projection of $2.6 billion, an increase of $1 billion,” he said As such, central government’s overall deficit for 2017, he said, is now projected at $5.9 billion (an estimated 3.8 per cent of GDP), compared with the original projected deficit of $6.0 billion (3.9 percent of GDP). On rumours of plans for further taxation, Imbert said, “There will thus be no increases in fuel prices in this midyear review.” However, between 2015 and 2018, he said, Government intends to remove the subsidy on gasoline and diesel, so that the price of fuel will rise and fall in accordance with changes in world oil prices and the ex-refinery price of petroleum products.
On exchange rates, he said, “There will be no drastic or sudden depreciation of the local currency.” PROPERTY TAX SOON On the implementation of the property tax, he said, phase one has started smoothly, starting with the submission of Valuation Return Forms with supporting documents by owners of residential properties on or before May 22.
“We do not intend to extend this deadline,” he said as it was necessary to assess the rental values and determine the applicable property taxes, so that tax collection can begin.
Due to postponement of this taxation over the last seven years, he said, “Government has lost over $2.5 billion.” Government, he said, was looking at using property tax on residential properties to assist local government bodies with their cash flow, and as the property tax collection system evolves, other categories of property tax will be considered for devolution to local government. It is likely, he said, “that property tax on industrial properties will remain the preserve of the central government.” On the establishment of the Revenue Authority, Imbert said, Government will submit enabling legislation to a Joint Select Committee of Parliament for scrutiny, and a project implementation committee has been established, to expedite the work required to establish the Revenue Authority.
To modernise the outdated revenue collection system, he said, appropriate consultations with recognised trade unions to build consensus will be held.
$1B RAISED IN FCB APO The sale of assets programme to support this year’s national budget, he said, remains on-track. First Citizens Bank’s Additional Public Offer (APO) which closed on April 7 attracted $1.025 billion. Though the APO did not achieve its target, he said, “if the offer price for FCB shares in this APO had been priced lower than the actual market price, the value of the shareholding of existing shareholders would have been seriously compromised and diluted, leading to loss in asset value and net worth for thousands of ordinary people, pension plans and institutional investors.” National Gas Company’s APO for the sale of 40,248,000 Class B shares, he said, would be launched shortly. This is expected to generate about $800 million.
GAS RAMP UP On reducing TT’s shortages of natural gas, Imbert said, “It is anticipated that first gas from the Dragon field could be obtained during the 2019 to 2020 period,” he said. “It is envisaged that a new pipeline would be constructed from the Dragon Field to the Hibiscus Platform, which is already connected by pipeline to Atlantic’s LNG facilities in Point Fortin,” he said.
A separate connector pipeline would also be built at Pt Lisas to supply gas for downstream Petrochemical industries. To this end, a preliminary project agreement between Venezuela’s PDVSA, National Gas Company and Shell was signed in Caracas on March 15. The companies are now working towards finalisation of a gas sales agreement by July.
On measures underway to establish the Procurement Commission, Imbert said, the proposed compensation package of $85,000 a month for the Regulator, has been approved by the Parliament, and a multidisciplinary transition team established in the ministry to prioritise the needs of staff of the Central Tenders Board.
THE CLICO ISSUE On the Clico Resolution Plan, he said, as at September 2016, Government and taxpayers would have expended some $20.3 billion in relation to the bailout of CL Financial. By April 2017, he said, Government would have incurred a further $3.2 billion in funding costs, advisor fees and other costs.
Government is owed about $325 million in interest on the Clico Investment Bank and BAICO promissory notes and up to $4.3 billion for other liabilities which could arise under the liquidity support agreement with First Citizens Investment Services (FCIS) and in relation to CIB’s liabilities to holders of Investment Note Certificates, which remain unpaid.
Should these liabilities arise, the Government may be owed up to $27.7 billion by the CLF Group. Having met its objectives, Imbert said, Government is focusing on the recovery of taxpayers’ funds.
Government’s repayment plan, he said, “envisages that legitimate non-conflicted third party creditors will be paid in addition to the repayment of the Government’s debt.
These remaining creditors include CLICO and BAT’s legitimate policyholders - CLICO, $9.8 billion and British American Trinidad, $800million - and the CIB Investment Note Certificate (INC) holders.