GEISHA KOW­LESSAR-ALON­ZO

Fi­nance Min­is­ter Dav­en­dranath Tan­coo is warn­ing that cit­i­zens should brace for the pos­si­bil­i­ty of in­creased bank charges fol­low­ing the Gov­ern­ment’s de­ci­sion to im­ple­ment a 0.25 per cent as­set levy on com­mer­cial banks and in­sur­ance com­pa­nies.

Speak­ing at the post-bud­get fo­rum host­ed by the T&T Man­u­fac­tur­ers’ As­so­ci­a­tion on Tues­day, Tan­coo ac­knowl­edged that while the levy is aimed at in­sti­tu­tions, its ef­fects could quick­ly trick­le down to con­sumers.

“It is very like­ly,” he said, “As we’ve seen in oth­er sec­tors, when tax­es are raised, the cost is passed di­rect­ly to con­sumers. That’s how busi­ness­es op­er­ate—and that’s what they will at­tempt to do,” he said.

These po­ten­tial fees be as a di­rect re­sult of the new Gov­ern­ment-im­posed as­set levy.

The 0.25 per cent levy is due to come on stream from Jan­u­ary 1, 2025 and, as part of the 2026 fis­cal pack­age, tar­gets the as­set base of com­mer­cial banks and in­sur­ance com­pa­nies. While it’s de­signed to boost pub­lic rev­enues by $575 mil­lion an­nu­al­ly, its rip­ple ef­fects could land square­ly on the shoul­ders of every­day con­sumers.

Tan­coo ex­plained that con­ser­v­a­tive lend­ing prac­tices and favourable mon­e­tary con­di­tions have dri­ven these out­comes and de­spite this, the av­er­age cit­i­zen con­tin­ues to be sub­ject­ed to un­rea­son­ably high fees and near-ze­ro re­turns on their sav­ings and in­vest­ments.

“Against this back­drop, I pro­posed to in­tro­duce an As­set Levy of 0.25 per cent, which is to be charged against the as­sets of com­mer­cial banks and in­sur­ance com­pa­nies op­er­at­ing in T&T,” he said while de­liv­er­ing his bud­get pre­sen­ta­tion on Mon­day.

Im­por­tant­ly, the as­set levy would not be ap­plied to fi­nan­cial in­sti­tu­tions and in­sur­ance com­pa­nies op­er­at­ing un­der the pro­vi­sions of the Spe­cial Eco­nom­ic Zones Act.

As fi­nan­cial in­sti­tu­tions ab­sorb this ad­di­tion­al cost, many may re­spond by ad­just­ing their fee struc­tures, tight­en­ing lend­ing con­di­tions, or in­creas­ing in­ter­est rates—moves that could make bank­ing more ex­pen­sive and bor­row­ing more dif­fi­cult for house­holds and small busi­ness­es al­ready grap­pling with a high cost of liv­ing.

Econ­o­mist Dr Ronald Ramkissoon, who is the for­mer man­ag­er of Re­pub­lic Bank Ltd’s Eco­nom­ic In­tel­li­gence Unit, cau­tioned that while the pub­lic may not feel the im­pact im­me­di­ate­ly, the levy is es­sen­tial­ly a tax on growth, which would in­evitably in­crease the cost of do­ing busi­ness for banks and con­strain their ca­pac­i­ty for fu­ture ex­pan­sion.

This new bur­den is lay­ered on­to an ex­ist­ing dif­fer­en­tial tax struc­ture, as com­mer­cial banks al­ready pay a 35 per cent tax on prof­its, a rate high­er than the 25 per cent paid by many SMEs and in­di­vid­u­als.

For the pub­lic, the key con­cern is whether, and by how much, this added cost could be passed as Ramkissoon said the levy could re­sult in high­er bank charges or high­er in­ter­est rates on loans to the or­di­nary con­sumer.

“It will re­sult in a high­er cost for the in­sti­tu­tion, be­cause it is now pay­ing a levy which it didn’t have be­fore. The ques­tion for the pub­lic is, will it be passed on? How will it be passed on? How much of it will be passed on is an­oth­er. It could be passed on de­pend­ing on the par­tic­u­lar in­sti­tu­tion. It could be passed in 2026 or in a few years to come if it is af­fect­ing prof­itabil­i­ty,” he said.

De­vel­op­ment econ­o­mist, Dr Mar­lene Attzs, said the pro­posed levy po­ten­tial­ly in­tro­duces an ad­di­tion­al cost to the fi­nan­cial sec­tor that could con­strain cred­it ex­pan­sion and prof­itabil­i­ty.

“While in­tend­ed to boost state rev­enues by an es­ti­mat­ed TT$575 mil­lion an­nu­al­ly, the levy ef­fec­tive­ly tax­es the scale of banks’ and in­sur­ance com­pa­nies’ op­er­a­tions rather than prof­its. This means it po­ten­tial­ly re­duces banks’ abil­i­ty to lend and build cap­i­tal buffers - par­tic­u­lar­ly sig­nif­i­cant giv­en the Cen­tral Bank’s cap­i­tal re­quire­ments. In prac­tice, this as­set levy could lead to tighter lend­ing con­di­tions, high­er bor­row­ing costs es­pe­cial­ly for small­er busi­ness­es and house­holds,” she ex­plained.

Attzs fur­ther warned that the levy is tech­ni­cal­ly a tax on banks but its rip­ple ef­fects could reach house­holds and busi­ness­es, es­pe­cial­ly those al­ready grap­pling with a high­er cost of liv­ing.  

“My broad­er con­cern is that, at a time when the coun­try needs stronger pri­vate sec­tor in­vest­ment to sup­port Gov­ern­ment’s eco­nom­ic pol­i­cy frame­work, I hope this mea­sure doesn’t in­crease bor­row­ing costs which could in turn slow eco­nom­ic mo­men­tum,” she said adding, “Which is why there’s need for pol­i­cy co­or­di­na­tion be­tween the gov­ern­ment and the reg­u­la­tor (Cen­tral Bank) to bal­ance fis­cal ob­jec­tives to en­sure or­di­nary cit­i­zens do not shoul­der a dis­pro­por­tion­ate share of the bur­den,” she said.

Attzs not­ed the as­set levy mod­el is op­er­a­tional in Bar­ba­dos and Ja­maica - Bar­ba­dos ap­plies a 0.35 per cent tax on the av­er­age do­mes­tic as­sets of banks, while Ja­maica im­pos­es a sim­i­lar levy rang­ing be­tween 0.14 per cent and 0.25 per cent.

In both cas­es, she added, banks adapt­ed by rais­ing lend­ing rates and shift­ing to­ward non-in­ter­est in­come ac­tiv­i­ties.

Be­yond di­rect fees, Ramkissoon high­light­ed a less ob­vi­ous but equal­ly sig­nif­i­cant con­se­quence: a re­duc­tion in cor­po­rate so­cial re­spon­si­bil­i­ty.

He warned that if the levy sig­nif­i­cant­ly af­fects a bank’s prof­itabil­i­ty, it could lead the in­sti­tu­tion to cur­tail pos­i­tive com­mu­ni­ty ac­tiv­i­ties it sup­ports, such as ini­tia­tives for youth, sports, the en­vi­ron­ment, and train­ing for small and medi­um-sized en­ter­pris­es.

He em­pha­sised, there­fore, the im­por­tance of mar­ket dy­nam­ics and con­sumer aware­ness as he coun­tered the no­tion that cus­tomers are help­less by stress­ing that in a mar­ket econ­o­my, con­sumers must be will­ing to “shop around.”

Mean­while, econ­o­mist Dr In­dera Sage­wan point­ed out that banks and in­sur­ance com­pa­nies have con­sis­tent­ly de­clared high­er and high­er prof­its year af­ter year, even while the wider econ­o­my has been in de­cline.

While she ac­knowl­edged that sta­ble, prof­itable fi­nan­cial in­sti­tu­tions are de­sir­able , she ar­gued that the present mo­ment in T&T’s his­to­ry de­mands a re­spon­si­ble re­sponse.

The cru­cial fac­tor is the hard­ship cur­rent­ly fac­ing the av­er­age cit­i­zen as she stat­ed that cus­tomers sim­ply can­not af­ford any new fees. Sage­wan point­ed out that T&T has al­ready seen a par­tic­u­lar­ly high in­ci­dence of de­fault­ing on mort­gages and home loans in re­cent years.

Sage­wan, a re­cent­ly ap­point­ed di­rec­tor at the Cen­tral Bank, al­so clar­i­fied that this mea­sure is viewed as a first levy and should there­fore be seen by the Gov­ern­ment as an ef­fort to en­sure that the fi­nan­cial sec­tor con­tributes to the cost of gov­ern­ing. By the banks, it should be seen as a man­age­able ex­pense giv­en their sus­tained prof­itabil­i­ty.

Tan­coo- Bank­ing sec­tor must con­tribute

Dur­ing his re­marks at the TTMA’s post-bud­get pan­el, Tan­coo un­der­scored that the time has come for the bank­ing and in­sur­ance sec­tors to play a more sub­stan­tial role in ad­vanc­ing na­tion­al de­vel­op­ment.

Speak­ing can­did­ly, Tan­coo framed the levy not as a puni­tive mea­sure, but as a fair and nec­es­sary call for shared re­spon­si­bil­i­ty in a so­ci­ety where cit­i­zens are al­ready bear­ing the brunt of ris­ing costs.

Tan­coo al­so high­light­ed a re­al­i­ty fa­mil­iar to many: the grow­ing bur­den of bank fees.

“I pay a sig­nif­i­cant sum to find out how much mon­ey I have in the bank,” he re­marked, point­ing to the pro­lif­er­a­tion of charges for ba­sic ser­vices—with­drawals, trans­fers, bal­ance in­quiries—that have be­come rou­tine in the bank­ing ex­pe­ri­ence. These fees, he not­ed, are part of a broad­er strat­e­gy that has al­lowed banks to gen­er­ate “sub­stan­tial prof­its.”

While he ex­pressed no re­sent­ment to­ward their suc­cess—”I am very glad that they are mak­ing mon­ey”—he em­pha­sised that prof­itabil­i­ty must come with a sense of civic du­ty.

“What we are ask­ing for as a gov­ern­ment,” Tan­coo ex­plained, “Is to put some of that to­wards na­tion­al de­vel­op­ment.”

The as­set levy, in his view, is a mod­est re­quest: a way for prof­itable in­sti­tu­tions to give back to the so­ci­ety that sus­tains them.

He was quick to clar­i­fy that the gov­ern­ment is not seek­ing to sti­fle en­ter­prise or in­ter­fere with pri­vate sec­tor op­er­a­tions.

Rather, it is ask­ing for a fair op­por­tu­ni­ty—for the fi­nan­cial sec­tor to sup­port the coun­try’s broad­er goals.

Tan­coo’s mes­sage, how­ev­er, was not di­rect­ed sole­ly at the banks.

He is­sued a ral­ly­ing cry to cit­i­zens, urg­ing them to re­claim their pow­er in the mar­ket­place.

“If you find that an in­sti­tu­tion is over­charg­ing you… if you find that an in­sti­tu­tion wants to main­tain its prof­it mar­gin at your ex­pense,” he said, “Then use your cell phone. Use your dig­i­tal foot­print. And find bet­ter op­tions.”

The fi­nance min­is­ter al­so touched on the so­cial re­spon­si­bil­i­ties of fi­nan­cial in­sti­tu­tions as he stat­ed that if cit­i­zens push back hard enough, “we may end up with toi­lets in the banks,” ref­er­enc­ing the need for more hu­mane and ac­ces­si­ble ser­vices, es­pe­cial­ly for the el­der­ly.