Government will, in the second half of this year, launch an aggressive tax arrears collection drive and enforce compliance—especially regarding VAT and gaming taxes—since collections of domestic taxes are lagging behind Budget projections, Finance Minister Colm Imbert says.
Delivering his mid-year review in Parliament yesterday, Imbert said the lag was due in large part to the economic slowdown, the depressed energy sector and compliance issues.
“It will take some time before the full impact of the Value Added Tax reform and the enhanced tax administration efforts are fully realised. For this reason, we will continue to have recourse to one-off capital revenues in the form of extraordinary dividends from some state enterprises and divestment proceeds,” he said.
He had opened his review statement saying, “It is no secret that the economic environment has turned out to be significantly worse than envisaged at the time of the 2016 Budget presentation.”
Imbert said it wasn’t feasible to have the review later in the year and allow for widespread public discussion on the most appropriate fiscal measures.
“We don’t have the luxury of time. We therefore ask the various interest groups to bear with us, as the economic situation is very serious and corrective action must be taken immediately, lest we find ourselves in such dire straits that we would have no choice but to request the IMF for balance of payments support, with all of the attendant adverse conditionalities that come with that scenario.
“We must avoid an IMF programme at all costs and must therefore be proactive...the reality is that the current severely depressed oil and gas prices have had a significant adverse impact on the public finances, notwithstanding government’s considerable efforts at fiscal consolidation, careful debt management and prudent expenditure restraint.”
He said the recent International Monetary Fund’s (IMF) visiting team’s report indicated that although T&T isn’t in a crisis, “if we are to survive the present economic difficulties, we need to recognise and quickly adapt to the new reality and avoid the mistakes of the last five years—underinvesting and undersaving.”
Imbert said in the first five months of the fiscal year, revenue collection was $2.96 billion lower than expected, but government expenditure was also $7.75 billion lower than programmed in the Budget.
He added Government had had no choice but to drastically cut programmed expenditure, “otherwise we would be faced with a situation where the Central Bank would have to cease honouring government cheques.” For fiscal 2016, Government is now looking at revised expenditure of $59 billion.
Also, fiscal operations in the second half of the fiscal year will now be based on an oil price of US$35 per barrel and a gas price of $2.00 per mmbtu.
“This would imply another sizable shortfall in energy tax receipts, compared with the budget projections.”
A marathon debate on the review was projected, lasting into this morning, since a number of ministers—Housing, Communication, Works and others—were expected to speak, along with responses from Opposition MPs.