Foreign digital services could provide Trinidad and Tobago with an additional source of revenue and improve competition for local businesses, but consumers are likely to bear at least part of the cost through higher subscription fees, experts say.
The measure was announced by Finance Minister Davendranath Tancoo in Monday’s 2027 Budget presentation. It is expected to generate $18 million annually and take effect on March 1, 2027.
Professional services firms EY and PwC have called for greater clarity on the Government’s plan to tax digital services supplied by foreign companies, including which services will be covered, how the tax will be collected and whether businesses could face additional costs.
Tancoo has not elaborated on the plan. He did not attend scheduled events yesterday at T&T Chamber’s annual post-budget meeting or the T&T Manufacturers’ Association post-budget discussion, where he was expected to speak.
Tax could extend beyond streaming
Digital anthropologist and CyberSafeTT head Daren Dhoray said the proposed tax could affect a much wider range of services than entertainment subscriptions such as Netflix.
He identified artificial intelligence platforms such as ChatGPT, Gemini and Claude, along with Spotify, cloud services and applications purchased through online stores, as services that could fall within the scope of the measure.
The final scope will depend on how the Government defines taxable digital services in the legislation.
Under the existing VAT Act, EY said digital services supplied by non-residents fall outside the tax net because “the supply is deemed to take place outside of T&T”.
Tancoo said the Government intended to address this by applying VAT to digital services supplied by non-resident providers to people in Trinidad and Tobago.
“Much of the digital services consumed in Trinidad and Tobago are supplied by businesses located outside of our borders. These entities do not contribute to our country’s income,” he said.
Foreign platforms likely to comply
Dhoray said foreign providers would not generally need to establish local subsidiaries to meet the proposed requirements. Instead, they could register through an online portal, collect VAT from customers in Trinidad and Tobago and remit the money to the tax authority.
He pointed to similar arrangements in Latin America, Europe and Asia, as well as Barbados.
Dhoray said companies were likely to comply because failure to do so could lead countries to make their services more difficult for citizens to access, potentially costing providers customers and revenue.
EY Caribbean tax partner Colin Ramsey said a simplified registration process could make compliance manageable, with foreign providers able to appoint agents or use an electronic system to report and remit VAT. Payments in foreign currency could also be an additional benefit, he said.
However, PwC warned that the legislation must address registration thresholds, the liability of online marketplaces and the interaction between VAT and withholding tax.
“Efficient collection should not result in two taxes on one payment or make Trinidad and Tobago unnecessarily difficult for global platforms to serve,” the firm said.
Economist Dr Vaalmiki Arjoon said an International Monetary Fund (IMF) study published in July found that applying VAT to digital services in the countries where they are consumed was an economically efficient way to tax cross-border services, helping to improve revenue collection and competition.
Revenue opportunity, but prices could rise
Rudy Rampersad, Trinidad and Tobago Manufacturers’ Association director and vice-president of regional initiatives at Ramps Logistics Ltd, described the proposal as an opportunity to generate additional revenue while the country awaits an anticipated increase in energy revenue.
EY’s Ramsey said applying VAT to foreign digital services could also improve competition for local businesses providing comparable services, including advertising providers.
However, both Ramsey and Rampersad warned that businesses were unlikely to absorb the full cost of the tax.
“Once the service becomes VATable, then one would expect that there will be an increase in the costs,” Ramsey said.
Rampersad estimated that the increase could be $20 to $30 a month, depending on the subscription.
Former TSTT chief executive officer Lisa Agard told Guardian Media that consumers would generally bear the economic cost through higher subscription or service charges, even though foreign providers would be responsible for collecting and remitting the tax.
Agard described the proposal as reasonable in principle, arguing that overseas suppliers should not enjoy a tax advantage simply because they deliver services remotely.
However, she said amendments to the VAT Act would need to establish enforceable obligations for non-resident suppliers and clarify which services would be taxable.
She also called for an accessible electronic system for overseas registration, filing and payment, with clear rules governing currency conversion, cancellations, refunds and prepaid subscriptions.
“The measure’s success will depend on these arrangements being operational and clearly communicated before it takes effect,” she said.
Caribbean countries move to tax digital services
The proposed tax comes as other Caribbean countries move to tax services supplied by foreign digital platforms.
In Jamaica, Finance Minister Fayval Williams defended a proposed General Consumption Tax on digital services during the opening of the 2026-2027 budget debate in March.
The Jamaican Government is targeting $300 million in revenue from the measure, which is expected to take effect between January and March 2027.
Williams said the tax was intended to ensure Jamaica received its fair share of the global digital economy, update tax laws to reflect changing business practices and address competition faced by local businesses.
