In an af­fi­davit filed on Mon­day, Min­is­ter of Fi­nance, Colm Im­bert, made a strong case that fur­ther de­lays in the im­ple­men­ta­tion of the Trinidad and To­ba­go Rev­enue Au­thor­i­ty (TTRA) would have a neg­a­tive im­pact on the fu­ture man­age­ment of the T&T econ­o­my.

The af­fi­davit filed by the min­is­ter was in re­la­tion to the law­suit by the Pub­lic Ser­vices As­so­ci­a­tion (PSA) seek­ing to stop the roll out of the TTRA. The PSA’s po­si­tion did not find favour with the judges in the High Court or the Court of Ap­peal.

The PSA, the rep­re­sen­ta­tive trade union for pub­lic ser­vants, is chal­leng­ing the con­sti­tu­tion­al­i­ty of the leg­is­la­tion that es­tab­lished the TTRA, which is meant to re­place the Board of In­land Rev­enue (BIR) and the Cus­toms and Ex­cise Di­vi­sion.

On Tues­day, the Court of Ap­peal grant­ed the PSA an in­ter­im or­der stay­ing the im­ple­men­ta­tion and/or op­er­a­tion of sec­tion 18 of the TTRA Act, pend­ing an ap­peal to the Privy Coun­cil.

That means the im­ple­men­ta­tion of the TTRA is on hold un­til at least Sep­tem­ber 25, 2024.

Ac­cord­ing to Mr Im­bert’s af­fi­davit, in ac­cor­dance with its strate­gic plan, the TTRA was sched­uled to for­mal­ly launch by the end of Ju­ly 2023. He not­ed that the trans­fer of of­fi­cers from BIR and Cus­toms called the op­tion pe­ri­od, would be fur­ther de­layed un­til the fi­nal de­ter­mi­na­tion of the mat­ter by the Privy Coun­cil.

Mr Im­bert said the Gov­ern­ment’s na­tion­al bud­get for fis­cal 2024 was based on an oil price of US$85.00 per bar­rel and a nat­ur­al gas net­back price of US$5.00 per MMB­tu.

He out­lined that oil and gas prices for the first six months of fis­cal 2024 have been much low­er than the prices on which the bud­get was based.

“The weight­ed av­er­age price of oil pro­duced in Trinidad and To­ba­go has fall­en be­low the pro­ject­ed US$85.00 per bar­rel, to US$81.04 per bar­rel and the net­back price of nat­ur­al gas has been a mere US$3.22 per MMB­tu or 36 per cent be­low the bud­get price,” ac­cord­ing to Mr Im­bert.

He not­ed that rev­enue from nat­ur­al gas is two-thirds of all rev­enue from pe­tro­le­um (i.e. oil and gas), so the sig­nif­i­cant short­fall in the ac­tu­al price of gas for the first half of fis­cal 2024 ver­sus the pro­ject­ed price, was “very se­ri­ous.”

He said oil and gas pro­duc­tion for the first six months of fis­cal 2024 have al­so been 15 per cent and 5 per cent, re­spec­tive­ly, be­low the vol­umes orig­i­nal­ly ex­pect­ed for 2024.

“This sig­nif­i­cant vari­ance from the bud­get­ed fig­ures is a se­ri­ous cause for con­cern and makes the speedy op­er­a­tional­i­sa­tion of the Rev­enue Au­thor­i­ty even more im­per­a­tive,” ac­cord­ing to the Im­bert af­fi­davit.

“The fall in oil and gas prices and low­er than ex­pect­ed pro­duc­tion of oil and gas has had a pro­found im­pact on the coun­try’s pe­tro­le­um rev­enues, lead­ing to a pro­ject­ed short­fall in rev­enue for 2024 of $5 bil­lion. When this sig­nif­i­cant short­fall is added to the ini­tial­ly es­ti­mat­ed bud­get deficit of $5 bil­lion for 2024, even with ad­di­tion­al one-off rev­enues from as­set sales, the coun­try’s deficit for 2024 is now ex­pect­ed to be as high as $9 bil­lion.

“The in­ter­na­tion­al price for oil and gas is not ex­pect­ed to in­crease sig­nif­i­cant­ly in the near fu­ture. Fur­ther, Trinidad and To­ba­go is a ma­ture en­er­gy province, hav­ing pro­duced oil for over 100 years, and is chal­lenged by nat­ur­al de­clines in oil and gas pro­duc­tion. In fact, oil pro­duc­tion in this coun­try is half of what it was 15 years ago, and gas pro­duc­tion is 35 per cent less than what it was 10 years ago. Such pro­duc­tion is not ex­pect­ed to im­prove un­til 2027, when it is ex­pect­ed that gas from Venezuela should be­come avail­able to the coun­try.”

Mr Im­bert went on to make the point that the next three years will be very chal­leng­ing for the coun­try from a rev­enue per­spec­tive. This seems to pred­i­cate the coun­try’s fu­ture rev­enue on the suc­cess of the Gov­ern­ment’s en­gage­ment with Venezuela, in al­low­ing T&T to ac­cess cross-bor­der nat­ur­al gas and gas from the Drag­on gas field, which is close to T&T’s mar­itime bor­der with Venezuela..

“In fact, un­less ad­di­tion­al tax rev­enue can be col­lect­ed through the im­prove­ments in tax ad­min­is­tra­tion that will come with a ful­ly op­er­a­tional Rev­enue Au­thor­i­ty, the Gov­ern­ment will soon be faced with very dif­fi­cult choic­es in terms of main­tain­ing the cur­rent lev­els of sub­si­dies, grants, free ser­vices and so­cial pro­grammes,” stat­ed the Im­bert af­fi­davit.

This, to me, is the most im­por­tant sen­tence in the le­gal doc­u­ment filed by Min­is­ter Im­bert in the Court of Ap­peal on Mon­day. In ef­fect, he is say­ing that if the TTRA is not ful­ly op­er­a­tional soon, the Gov­ern­ment may have to cut back “the cur­rent lev­els of sub­si­dies, grants, free ser­vices and so­cial pro­grammes.”

This state­ment must be placed in the con­text of the BIR’s ob­vi­ous at­tempt to seek to col­lect un­paid tax­es from busi­ness­peo­ple across this coun­try.

Mr Im­bert’s choice of the words “the Gov­ern­ment will soon be faced with very dif­fi­cult choic­es in terms of main­tain­ing” trans­fers and sub­si­dies to the pop­u­la­tion, should al­so be viewed in the con­text of his com­ments be­fore the Stand­ing Fi­nance Com­mit­tee on Mon­day on the dif­fi­cul­ties of main­tain­ing the Chron­ic Dis­ease As­sis­tance Pro­gramme (CDAP).

In his af­fi­davit, Mr Im­bert al­so said the an­nu­al tax gap, that is the dif­fer­ence be­tween ac­tu­al tax rev­enue col­lect­ed by the Gov­ern­ment and po­ten­tial tax rev­enue, is es­ti­mat­ed to be more than $5 bil­lion and could be as high as $10 bil­lion.

“In light of present oil and gas prices on the in­ter­na­tion­al mar­ket and the like­li­hood that they will not in­crease sig­nif­i­cant­ly in the near fu­ture, the re­duc­tion of the tax gap through the in­creased col­lec­tion of tax­es is like­ly to be the on­ly way of re­duc­ing the bud­get deficit and achiev­ing fis­cal con­sol­i­da­tion while at the same time main­tain­ing present lev­els of Gov­ern­ment ex­pen­di­ture,” ac­cord­ing to the le­gal doc­u­ment sub­mit­ted by Mr Im­bert.

Is it ac­cu­rate for T&T’s Min­is­ter of Fi­nance to state that “the re­duc­tion of the tax gap through the in­creased col­lec­tion of tax­es is like­ly to be the on­ly way of re­duc­ing the bud­get deficit and achiev­ing fis­cal con­sol­i­da­tion?”

In point 12 of his af­fi­davit, Mr Im­bert states, “In ac­cor­dance with the strate­gic plan, the Au­thor­i­ty aims to re­tain its tax col­lec­tion lev­els in its first year of op­er­a­tion, fol­lowed by in­creas­es in rev­enue equiv­a­lent to one per cent and three per cent of gross do­mes­tic prod­uct in the sec­ond and third year of its op­er­a­tion, re­spec­tive­ly, which would be equiv­a­lent to an in­crease in rev­enue of ap­prox­i­mate­ly $2 bil­lion and $6 bil­lion re­spec­tive­ly.”

If Mr Im­bert as­sumed that the TTRA would have been op­er­a­tional by the end of Ju­ly, he must al­so have as­sumed the Au­thor­i­ty would “re­tain its tax col­lec­tion lev­els in its first year of op­er­a­tion.” By the min­is­ter’s as­sump­tion, there­fore, the TTRA’s first year of op­er­a­tion would have been for the 2025 fis­cal year, which would be from Oc­to­ber 1 2024 to Sep­tem­ber 30, 2025. In that fis­cal year, ac­cord­ing to the TTRA strate­gic plan, the Au­thor­i­ty did not ex­pect to col­lect any more rev­enue than if the BIR and Cus­toms were still in op­er­a­tion

For the 2026 fis­cal year, its sec­ond year of op­er­a­tion, the ex­pec­ta­tion is that the TTRA would col­lect $2 bil­lion. In 2027, its third year of op­er­a­tion, the Au­thor­i­ty is ex­pect­ed to col­lect $6 bil­lion. Giv­en that the an­nu­al tax gap “could be as high as $10 bil­lion,” is the TTRA the panacea for T&T’s tax col­lec­tion is­sues?

Mr Im­bert, as well, made the ex­treme­ly valu­able point that “the Gov­ern­ment can­not con­tin­ue to sus­tain bud­get deficits by in­creas­ing Gov­ern­ment bor­row­ings and Gov­ern­ment debt much longer, and in­ter­na­tion­al cred­it rat­ing agen­cies have warned that if the Gov­ern­ment is not able to achieve fis­cal con­sol­i­da­tion in the near fu­ture the coun­try’s in­ter­na­tion­al cred­it rat­ing will be down­grad­ed,” ac­cord­ing to Mr Im­bert’s af­fi­davit.

There is no dis­pute that the Gov­ern­ment “can­not con­tin­ue to sus­tain bud­get deficits by in­creas­ing Gov­ern­ment bor­row­ings and Gov­ern­ment debt much longer.”

I am to­tal­ly in favour of fis­cal pru­dence and of “cut­ting our size to fit our cloth,” as Prime Min­is­ter Dr Kei­th Row­ley said in May 2017.

This col­umn sup­ports the im­ple­men­ta­tion of the prop­er­ty tax and the re­duc­tion in the fu­el sub­sidy.

But, as Mr Im­bert has proven in the past, col­lect­ing tax rev­enue from the pop­u­la­tion, through the TTRA or oth­er­wise, is NOT the on­ly way to in­crease rev­enue.

In 2018, this very same min­is­ter im­ple­ment­ed the Na­tion­al In­vest­ment Fund, which raised $4 bil­lion main­ly through the se­cu­ri­ti­sa­tion of the as­sets of Cli­co and Cli­co In­vest­ment Bank.

Can we have some more NIFs?

And what about di­ver­si­fi­ca­tion, which should have be­gun in 2015?