Cash flow is the term used to de­scribe the in­flow and out­flow of cash to an or­gan­i­sa­tion and is prob­a­bly the most im­por­tant met­ric in any busi­ness. With­out read­i­ly ac­ces­si­ble cash, any busi­ness will have dif­fi­cul­ty op­er­at­ing and will soon lose the con­fi­dence of its stake­hold­ers. Busi­ness an­a­lysts use this im­por­tant met­ric to as­sess the health of any busi­ness, as cash flow weak­ness­es gen­er­al­ly in­di­cate a prob­lem in the busi­ness mod­el.

The clo­sure of the Petrotrin re­fin­ery is an ex­cel­lent ex­am­ple of what hap­pens when a busi­ness seg­ment is los­ing cash. In the 2023 bud­get pre­sen­ta­tion, Min­is­ter Im­bert said that VAT re­funds owed to small and medi­um en­ter­pris­es (SMEs) would be paid by De­cem­ber 31, 2024. These re­funds were not paid on time be­cause the Gov­ern­ment had cash flow con­straints.

The im­me­di­ate cause of this de­lay was low­er than es­ti­mat­ed oil and gas pro­duc­tion, cou­pled with de­pressed oil and gas prices in the last six months of 2024. Tax rev­enues were low­er than ex­pect­ed, forc­ing the Gov­ern­ment to pri­ori­tise pay­ments.

The promised VAT re­pay­ments were there­fore de­layed, and pay­ments will be made by Jan­u­ary 31. VAT re­funds are meant to be re­paid with­in the fi­nan­cial year. Pay­ment de­lay af­fects the cash flow of the busi­ness­es. The last es­ti­mate of the un­paid VAT re­funds amount­ed to $6.5 bil­lion and was re­lat­ed to mul­ti­ple fi­nan­cial years. This demon­strates that short-term prob­lems, if not dealt with im­me­di­ate­ly, grow in­to se­ri­ous, longer-term is­sues.

Since VAT re­funds are due with­in the fi­nan­cial year, non-pay­ment of re­funds means that the Gov­ern­ment is over­stat­ing its rev­enue po­si­tion and un­der­stat­ing its deficits. Gov­ern­ment fi­nances have been in deficit for 16 years, and the pro­jec­tions in­di­cate that fis­cal deficits will con­tin­ue for the fore­see­able fu­ture. This is not sus­tain­able. The pay­ments to SMEs were meant on­ly to al­le­vi­ate the po­si­tion of small­er busi­ness­es. Mr Im­bert has in­di­cat­ed that 80 per cent of the un­paid VAT re­funds are nor­mal­ly due to en­er­gy sec­tor com­pa­nies, im­ply­ing that they would not be un­du­ly in­con­ve­nienced.

The key point is that if the Gov­ern­ment is in­con­ve­nienced by neg­a­tive move­ments in gas pro­duc­tion and en­er­gy prices, the econ­o­my will suf­fer a sim­i­lar knock-on ef­fect, and every­one wants to be paid what they are due. In Oc­to­ber, Min­is­ter Im­bert pre­sent­ed an out­look that sug­gest­ed the econ­o­my will grow in 2025, al­though things will be tight. Last week the Trinidad and To­ba­go Cham­ber of Com­merce re­leased a re­port ti­tled “Chal­lenges in Ac­cess­ing For­eign Ex­change: Busi­ness In­sights.” The sur­vey not­ed that all busi­ness­es, es­pe­cial­ly SMEs, strug­gled to ac­cess the for­eign cur­ren­cy nec­es­sary to pay for im­ports and in­ter­na­tion­al trans­ac­tions, lead­ing to op­er­a­tional chal­lenges and in­creased costs.

The point is that de­layed VAT pay­ments cou­pled with the in­abil­i­ty to ac­cess for­eign ex­change hurt the pri­vate sec­tor’s op­er­a­tions and prof­itabil­i­ty. Low­er prof­itabil­i­ty means low­er tax rev­enue. Ul­ti­mate­ly these neg­a­tive im­pacts will wors­en if both is­sues, amongst oth­ers, are not ad­dressed as they un­der­mine busi­ness con­fi­dence. The Au­di­tor Gen­er­al’s Re­port and the fol­low-up Spe­cial Re­port for 2023 both fo­cused on the gov­ern­ment’s rev­enue po­si­tion.

Both re­ports out­lined ma­jor weak­ness­es in the rev­enue rec­on­cil­i­a­tion process and caused the au­di­tor gen­er­al’s dis­claimers of opin­ion. It is un­clear whether these weak­ness­es have been re­solved. The in­abil­i­ty to sat­is­fac­to­ri­ly re­dress the out­stand­ing VAT re­pay­ments and the con­tin­u­ing dif­fi­cul­ties in ac­cess­ing for­eign ex­change are symp­toms of deep­er un­der­ly­ing prob­lems. When will our po­lit­i­cal lead­ers stop kick­ing the can down the road?