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Too early to tell, says tax expert
Higher energy prices and increased gas production are indicators that the economic climate in the country is improving but Arun Seenath, partner at Deloitte, is adopting a wait-and-see posture on whether T&T is fully in recovery mode.
He wants to see trends over the next two quarters of 2018 before making a definitive statement on the matter.
As he gave his assessment on the mid-year review of the 2018 Budget delivered by Finance Minister Colm Imbert earlier this month, he said: “Unless the minister can give some projection—when they start paying their corporation tax, their petroleum profits tax—that’s when you would see the true impact of revenue coming back from oil and gas.”
In an interview at Deloitte’s Ariapita Avenue headquarters, Seenath said increased gas production could have a trickle-down effect to create employment and trigger increased spending. In fact, at Deloitte, which provides auditing, tax and advisory services to a large local clientele, they have started seeing some signs of growth in sectors of the economy.
“There could be some level of turnaround, but it difficult to say in which sector that has happened,” he said.
“We are mindful that tax rates increased in 2016, 2017 and 2018. The first quarter of 2018 would have been March 2018, you would have seen the impact of the increased taxation rate on the banks which went from 35 per cent.”
This increase might have caused a spike in revenue, he added.
Commenting on the projected reduction in the deficit, he said: “There is need to understand how much Government owes in terms of service providers, in terms of contractors, as well as VAT returns.
“There have been cases where VAT refunds have been paid some have not been paid.”
Millions in property tax lost
Seenath said property tax is a fair source of revenue but, for years, there has been a lot of evasion. He estimates that T&T lost about $300 million for each of the years property tax was not collected.
“Every dollar counts in terms of our deficit and where we are at,” he said.
“When politicians act in this way it is not simply because they are managing the finances, they are also managing their term as a government and those terms come to an end.”
While is hopeful that implementation of the Revenue Authority will lead to improvements in tax collection, Seenath warned that the same issues which hampered the Board of Inland Revenue—corruption, poor productivity, poor efficiency—could lead to leakages.
These inefficiencies must be eradicated of there is to be any real change in T&T’s system of tax and tax collection, he said.
Seenath said consumers have to adjust their spending patterns to accommodate property tax and the possibility of less disposable income. It can no longer he about impulse buying. Instead the focus should be on price versus preference.
He said it was prudent decision not to devalue the dollar since the price of basic items.
“A devaluation would result in a larger price for inputs. The revenue would go up obviously. The net effect would not be as significant, and that is just on the manufacturing side.”
He is of the strong view that those who can afford to pay taxes should be made to pay more, including more of the self employed, such as taxi drivers and doubles vendors.
He advised that the authorities look at ways to include more people in the tax net:
“If a doubles man must sell doubles, he needs to get a food badge. Instead, of a food badge costing $250 it should be $5,000.
“The taxes should be collected through the licences, through the permits.”
Seenath also suggested increasing the fees for taxi drivers to renew their permits.
He fully supports the idea of a National Investment Fund which he said could help to soak up liquidity. The strategy, he said, is to encourage savings by including individual investors.
While he see challenges in the area of foreign direct investment, Seenath is confident that improvements in the economy will attract more investment.
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