Government’s imposition of a seven per cent tax on online shoppers is expected to generate an annual revenue of $300 million, Finance Minister Colm Imbert said last night.
He made the comment during a live discussion titled “Financing the Future” with CNC3 news anchor Khamal Georges, which dealt with issues such as taxes, subsidies and foreign exchange.
Last Friday while presenting the mid-year budget review, Imbert announced that the online tax would go into effect by September, and allow Government to manage the increase in foreign outflows and reduce revenue leakage.
Speaking on the issue last night, Imbert said local banks have been earning between 12 to 13 per cent on all foreign exchange transactions associated with online shopping. He said the amount of foreign exchange that is consumed in T&T annually was US$7 billion. He said 13 per cent of that figure is roughly US$900 million.
“That works out to about $6 billion (TT). If we are able to save tax... $4 billion of that we would get (save) about $300 million. That could run a hospital. And people need to understand this.”
One area the money could be pumped into, Imbert said, was the $1.5 billion Point Fortin Hospital which is under construction.
“We have the Couva Children’s Hospital that has already cost the country $1.5 billion, while the Arima Hospital is $1.8 billion,” Imbert said.
Once these hospitals are commissioned, Imbert said it will cost taxpayers millions of dollars to maintain.
“So this online tax could certainly run one of these hospitals.”
While some economists have argued that seven per cent tax was insufficient to curb the demand on foreign exchange and dissuade shoppers from buying online, Imbert said the Government took the decision not to impose a punitive tax.
“We would see how it affects the demand on foreign exchange and the demand on online shopping that takes place.”
Imbert said Argentina had imposed an online tax of 50 per cent in 2015.
“They are completely discouraging online shopping.” He also explained that if oil prices remain in at US$45 a barrel, the country could face a situation where our reserves could drop at a tremendous rate unless we do something about it.
While Imbert said Government was still working on a method of collecting the online tax, he said several countries used courier companies to collect their taxes.
“If you try to get into people’s banking or credit card records...then there may be, I say may be, this is not definite yet, there may be a breach of bank card confidentiality. A lot of countries collect it as it is delivered. That’s why we want to come up with a mechanism and collect the tax.”
Imbert denied that the number of taxes imposed on the population would lead to social instability.