Two econ­o­mists have called the UNC’s pro­posed plans for the fis­cal man­age­ment of the na­tion ques­tion­able and im­prob­a­ble.

In an in­ter­view with the Busi­ness Guardian, To­bag­on­ian Dr Vanus James said: “The over­all promise of a bal­anced bud­get over 2020-2025 is not like­ly to be fea­si­ble in the con­text of a de­pressed econ­o­my post-COVID and in the con­text of a promised re­duc­tion of var­i­ous tax rates (in­di­vid­ual and cor­po­rate, and con­sump­tion).”

In the Debt Con­sol­i­da­tion and Man­age­ment Strat­e­gy sec­tion of the UNC’s Na­tion­al Eco­nom­ic Trans­for­ma­tion Mas­ter­plan 2025, the par­ty stat­ed its in­ten­tion run a bal­anced bud­get over the 2020-2025 pe­ri­od and to es­tab­lish the debt to GDP ra­tio at 60 per cent by 2025.

How­ev­er, in an­oth­er part of the Mas­ter­plan, the UNC in­di­cat­ed that it would re­move and re­duce a vast ar­ray of tax­es.

The par­ty in­di­cat­ed that a new UNC Gov­ern­ment would strength­en, re-en­gi­neer and trans­form the Board of In­land Rev­enue (BIR), the VAT Of­fice and Cus­toms and Ex­cise.

It ex­plained that this in­sti­tu­tion­al strength­en­ing is im­por­tant to im­prove rev­enue col­lec­tion and ad­dress weak­ness­es in tax ad­min­is­tra­tion and com­pli­ance.

The par­ty added that it would scrap the pro­posed rev­enue au­thor­i­ty, dis­miss the con­tro­ver­sial prop­er­ty tax, re­duce per­son­al in­come tax­es (PAYE), de­crease cor­po­ra­tion tax­es and re­move VAT on over 7,000 items.

The UNC plan in­di­cat­ed that gov­ern­ment has sti­fled busi­ness­es and crip­pled their cash­flow through non-pay­ment of VAT re­funds.

How­ev­er, James dis­closed that tax­es on con­sump­tion would tend to be high­ly re­gres­sive (tak­ing a larg­er per­cent­age of in­come from low-in­come earn­ers than from high-in­come earn­ers) and that would be­come an is­sue when the time comes to im­ple­ment a shift to such tax­es.

James con­tin­ued to high­light in­con­sis­ten­cies, not­ing: “This par­ty (UNC) has long op­posed the prop­er­ty tax but still em­braces land and build­ing tax. There seems to be some need to clar­i­fy this stance, since land and build­ings qual­i­fy as most of what is called prop­er­ty un­der the prop­er­ty tax.”

Ac­cord­ing to James, debt sus­tain­abil­i­ty would in­volve more than man­age­ment of pay­ments. He in­di­cat­ed that the key tool in this pro­posed debt man­age­ment strat­e­gy is usu­al­ly to grow the econ­o­my faster than the rate of in­ter­est on the debt.

Fur­ther, James ob­served that the promise is to shape a prop­er debt man­age­ment strat­e­gy and tar­get, but the doc­u­ment has al­ready de­cid­ed that a 60 per cent debt to GDP ra­tio is op­ti­mal.

In the UNC plan it an­nounced that it would “es­tab­lish for­mal fis­cal and debt tar­gets” and com­mu­ni­cate these to the mar­ket and the gen­er­al pub­lic.” It not­ed that it (UNC) in­tends to run a bal­anced bud­get po­si­tion over the 2020 -2025 pe­ri­od and to sta­bi­lize pub­lic debt at about 60 per cent of GDP by 2025.

James said that this is a like­ly con­tra­dic­tion.

Al­so com­ment­ing on the plan was, de­vel­op­ment and eco­nom­ics con­sul­tant Dr In­dera Sage­wan who ex­pressed that, when tak­en at face val­ue - the plan has a good ring to it. She not­ed: “We must recog­nise that the doc­u­ment is for the pur­pose of pub­lic re­la­tions.”

How­ev­er, Sage­wan said, “when you try to drill down” to the de­tails of the plan - it is on­ly then you would be able to de­ter­mine whether the pro­posed strat­e­gy can in fact, be re­alised.

She con­tend­ed: “A lot of the pro­jec­tions be­ing pre­sent­ed through the plan, at this point in time, we can on­ly analyse it at face val­ue, be­cause we do not know what the un­der­ly­ing as­sump­tions and mech­a­nisms are for mak­ing this thing hap­pen.”

With re­gard to hav­ing a bal­anced bud­get, Sage­wan said that the plan where the par­ty would by in­ten­tion­al­ly fore­go­ing cur­rent rev­enues through the tax pro­gramme by cut­ting tax­es and ze­ro rat­ing VAT on all food items - that means the par­ty would will­ing­ly forego the in­come that would nor­mal­ly be pro­duced.

Al­beit, Sage­wan ar­gued that if rev­enue is be­ing will­ing­ly for­gone from cur­rent rev­enue streams while in­creas­ing ex­pen­di­ture through trans­fer pay­ments (men­tioned in var­i­ous parts of the plan) then the on­ly way to ar­rive at a bal­anced bud­get some­where down the line is through in­creas­ing al­ter­na­tive rev­enue streams.

And while the UNC in its plan has pro­posed the non-en­er­gy di­ver­si­fi­ca­tion in its ‘Mas­ter­plan’ as a source of ad­di­tion­al rev­enues, Sage­wan high­light­ed that di­ver­si­fi­ca­tion is not a short-term rev­enue gen­er­at­ing mech­a­nism.

She posit­ed: “You know with any new busi­ness - it takes three to five years be­fore the busi­ness turns a prof­it. So I mean if we’re start­ing the di­ver­si­fi­ca­tion process it re­al­ly begs the ques­tion as to whether in four years time (2025), that gov­ern­ment would be able to be re­al­iz­ing the kinds of tax­es on these new en­deav­ours.”

An­oth­er way that the UNC plan pro­pos­es to raise rev­enue is to in­crease du­ty rates on non-es­sen­tial im­ports. It said: “To com­pen­sate for the re­moval tax on in­come be­low $1 mil­lion, im­port du­ties will be raised. Cer­tain ba­sic food, med­i­cines and es­sen­tial items will be ex­empt from im­port du­ties to en­sure af­ford­abil­i­ty to the poor and most vul­ner­a­ble.”

How­ev­er James ex­pressed con­cern with this propo­si­tion. He said, that T&T is an im­port-de­pen­dent coun­try and there­fore “non-es­sen­tial has a very lim­it­ed mean­ing”. Hence the rea­son James as­sert­ed that ris­ing im­port du­ties tend to be cost in­creas­ing and self-de­feat­ing.

He ex­pressed the pos­si­bil­i­ty that the fuller UNC plan has al­ready con­sid­ered com­ple­ments to this strat­e­gy that take ac­count of the com­pet­i­tive strat­e­gy the coun­try will pur­sue to achieve self-sus­tain­ing growth, in­clud­ing through col­lab­o­ra­tion with­in CARI­COM.

If not, James said that he could fore­see trou­ble when im­ple­ment­ing this pro­pos­al.