An­tho­ny Wil­son

There is much to crit­i­cise in the 2012 bud­get. One of the fail­ings of Fi­nance Min­is­ter Win­ston Dook­er­an was that he pre­sent­ed this year's bud­get with very lit­tle ref­er­ence to the bud­get he pre­sent­ed for the 2011 fis­cal year, which end­ed on Sep­tem­ber 30. The Min­is­ter of Fi­nance made no at­tempt to com­pile a check­list of the achieve­ments or short­com­ings of the 2011 bud­get so that any­body lis­ten­ing to him would not know that many of the projects and ideas he float­ed in the 2012 bud­get were re­gur­gi­ta­tions from pre­vi­ous bud­gets.

With pri­or apolo­gies to Plan­ning Min­is­ter Bhoe Tewarie, one of the as­pects of the bud­get that has sur­prised is that af­ter 18 months in of­fice the ad­min­is­tra­tion is still strug­gling to put to­geth­er a co­her­ent vi­sion for fu­ture rev­enue gen­er­a­tion that takes in­to ac­count the pos­si­bil­i­ty that de­vel­op­ments in the glob­al econ­o­my could have a sig­nif­i­cant im­pact on the amount of tax­es de­posit­ed in­to the Trea­sury. The on­ly way the Min­is­ter of Fi­nance could have de­cid­ed to pred­i­cate to­tal rev­enue col­lec­tion of $47 bil­lion on an oil price of US$75 per bar­rel and a nat­ur­al gas price of US$2.75 a unit is if he is ex­pect­ing a full-blown eco­nom­ic re­cov­ery in the US and Eu­rope. The ex­pec­ta­tion of col­lect­ing $47 bil­lion in the cur­rent fis­cal year is on­ly re­al­is­tic if all of the as­sump­tions that have been made about growth in the lo­cal and in­ter­na­tion­al economies, in­fla­tion and glob­al com­mod­i­ty de­mand come to pass.

On the ex­pen­di­ture side, there was no ac­count­ing in the pre­sen­ta­tion made in Par­lia­ment on Mon­day for the in­crease in to­tal ex­pen­di­ture in the 2011 fis­cal year to $52.966 bil­lion from $46.701 bil­lion in the 2010 fis­cal year, ac­cord­ing to sta­tis­tics in the 2011 Re­view of the Econ­o­my. This means that the Gov­ern­ment's ex­pen­di­ture dur­ing the 2011 fis­cal year in­creased by $6.265 bil­lion or 13 per cent and there was lit­tle by way of ex­pla­na­tion dur­ing Mr Dook­er­an's bud­get pre­sen­ta­tion for this in­crease. A sig­nif­i­cant con­trib­u­tor to the in­creased ex­pen­di­ture is the fact that the short­fall in the sub­sidy for the sale of pe­tro­le­um prod­ucts amount­ed to $1.1 bil­lion.

It is in­deed sur­pris­ing that the Gov­ern­ment opt­ed not to cap or elim­i­nate the gaso­line sub­sidy at a time of rel­a­tive pros­per­i­ty and at a time when the rate of in­fla­tion is at a four-decade low. It seems that the de­ci­sion on amend­ing or re­mov­ing the sub­sidy is go­ing to wait un­til the rate of in­fla­tion climbs back in­to dou­ble dig­its and the Gov­ern­ment's fis­cal back is against the wall. Does the Gov­ern­ment have a plan B for the econ­o­my that takes in­to ac­count a sce­nario in which the glob­al prices of our ma­jor petro­chem­i­cal ex­ports suf­fer sharp re­duc­tions as a re­sult of an eco­nom­ic re­ver­sal in Chi­na? Or is there an ex­pec­ta­tion that the Chi­nese econ­o­my will con­tin­ue to grow at nine to ten per cent a year in­def­i­nite­ly?

Has the Gov­ern­ment de­cid­ed what ex­pen­di­tures it is go­ing to cut first if rev­enue pro­jec­tions do not turn out as favourably as ex­pect­ed or will the Gov­ern­ment wait un­til the econ­o­my is in the eye of a storm to make such de­ci­sions? But there is al­so a great deal to ap­plaud in the bud­get. Un­re­served­ly, Mr Dook­er­an's pro­pos­als to re­vi­talise the lo­cal cap­i­tal mar­ket is a vi­sion­ary and pru­dent de­ci­sion that is wor­thy of com­men­da­tion. Hav­ing spo­ken in favour of pri­vati­sa­tion of state-owned com­pa­nies and in­vest­ments in the lo­cal stock mar­ket for years now, this is one area in which the Peo­ple's Part­ner­ship ad­min­is­tra­tion can dis­tin­guish it­self from the pre­vi­ous Patrick Man­ning-led gov­ern­ment, which com­plete­ly ig­nored the lo­cal stock mar­ket and the pos­i­tive im­pact on wealth cre­ation of own­ing lo­cal eq­ui­ties.

But the min­is­ter should con­sid­er the fact that the val­ue of the shares in Plipde­co, First Cit­i­zens and the T&T Mort­gage Com­pa­ny that he pro­pos­es to place on the lo­cal mar­ket would be en­hanced if there was re­al con­fi­dence in the long-term fu­ture of the econ­o­my. The fact that small- and medi­um-sized com­pa­nies list­ing on the T&T Stock Ex­change are like­ly to see their cor­po­ra­tion tax rate re­duced from 25 per cent to ten per cent for five years is as sig­nif­i­cant an in­cen­tive as it is pos­si­ble to de­vise to stim­u­late the lo­cal stock mar­ket. As Mr Dook­er­an point­ed out, in what was the rhetor­i­cal high­light of Mon­day's pre­sen­ta­tion: "Small and medi­um en­ter­pris­es are bet­ter served by rais­ing cap­i­tal on the do­mes­tic cap­i­tal mar­ket. For too long they have been re­ly­ing on high-cost com­mer­cial fi­nance which has lim­it­ed their vi­a­bil­i­ty and ex­pan­sion. In our ef­forts to as­sist the SME sec­tor and at the same time strength­en the do­mes­tic cap­i­tal mar­ket we are propos­ing to en­cour­age them to ac­cess the fa­cil­i­ties pro­vid­ed by the Trinidad and To­ba­go Stock Ex­change.

"SMEs with a min­i­mum cap­i­tal of $5 mil­lion will be able to list on the TTSE pro­vid­ed that they have at least 25 share­hold­ers, hold­ing at least 30 per cent of the share cap­i­tal which must not ex­ceed TT$50 mil­lion. To en­cour­age this ac­tiv­i­ty, the Cor­po­ra­tion Tax Act, Chap. 75:-2 shall be amend­ed to pro­vide for a re­duced Cor­po­ra­tion Tax at a rate of ten per cent on tax­able prof­its, for the first five years of op­er­a­tions."

That's very ex­cit­ing and one hopes for ear­ly im­ple­men­ta­tion and a flood of tak­ers.

Key Eco­nom­ic in­di­ca­tors

In­ter­na­tion­al re­serves US$9.7 bil­lion

Fis­cal 2011 rev­enue $45 bil­lion

2011 bud­get­ed oil price US$65 a bar­rel

2011 bud­get­ed nat gas price US$2.75 per unit

Fis­cal 2011 deficit $7.9 bil­lion

HSF val­ue US$4.1 bil­lion

Prime Lend­ing rate 7.75%

Re­po rate 3.0%

In­fla­tion rate 0.6%

3-month T Bill 0.25

6-month T-Bill 0.38

Un­em­ploy­ment rate 6.3%