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12.5 per cent tax across the board most realistic option—Imbert
Finance Minister Colm Imbert says the UK’s staggered VAT rate cannot be applied to T&T because Britain’s income tax rate is generally higher.
He was responding to concerns that VAT could be made more affordable for the needy.
Speaking to the Sunday Guardian yesterday, Imbert said, “That is the ideal solution, it’s something that we’re looking at long term to have a flat rate, maybe a lower rate with no exemptions.
“Our system is different. The UK has fairly high income tax, so they can afford to manipulate their VAT system and have exemptions.
“We have a low income tax rate, so we need to have as efficient and as strong a VAT collection system as possible.
Imbert said “we in T&T have gone through a long process where we have continuously lowered our income tax rate and corporation tax rate that is now down to 25 per cent and consistently increased the personal allowance.”
He indicated T&T’s tax rate is lower than England’s, which meant revenue would be lost unless collections increased.
Imbert said, therefore, the country had to compensate for the reduction in collections from income tax by way of a sales tax or a consumption tax which was VAT.
He said VAT was not a social engineering tool or instrument, that was the mistake people were making. It was just a tax.
Imbert said that VAT was a tax on sales so that the Government could get revenue to run the country, support social safety networks and subsidies.
He said what the Government preferred was to have as few exemptions and as low a rate as possible.
Imbert said by doing this the Government could use the revenue collected to assist the disadvantaged and people at the lower end of the spectrum.
When asked what measures the Government had in place for the scenario of inflation caused by an increase in prices, he said naturally items that were not subject to tax before would demonstrate an increase in price. Imbert said, however, that would be countered by the general reduction in the rate of VAT itself.
He said the net effect was something that could not be measured at this point in time. “We will have to wait and see,” Imbert said.