SHARLENE RAMPERSAD
Between 2010 and 2018, Trinidad and Tobago lost out on over US$7 billion in tax revenue from multinational oil companies operating in the country.
This estimate came from an Economic Commission for Latin America and the Caribbean (ECLAC) report, which noted T&T could have capitalised on these tax revenues if the country had transfer pricing legislation.
And according to Minister in the Ministry of Finance, Brian Manning, consideration for this type of legislation is currently before the Cabinet.
The issue of transfer pricing legislation was raised by Independent Senator Charrise Seepersad yesterday in the Senate.
Seepersad quoted from the ECLAC report.
“This study estimates that between 2010 and 2014 when natural gas prices were high, revenue collections in Trinidad and Tobago could have been five times higher. In 2018, when the prices were low, the government could have received revenue that was approximately six times higher than actual receipts. This quantified to US$6.26 billion in revenue loss from the natural gas sector alone. For the entire energy sector, the estimated loss is US$7.9 billion to $13.7 billion,” Seepersad said.
She said that extra revenue could have had a positive impact on the country’s Gross Domestic Product (GDP) and its post-COVID-19 economic recovery.
“Countries like Trinidad and Tobago depend on multinational energy companies to produce and monetize its natural gas resources. Doing business with sophisticated multinational, vertically integrated energy companies with fragmented but interconnected global value chains creates many opportunities for the manipulation of taxable income,” Seepersad said.
In response, Manning also quoted from the ECLAC report.
“According to an ECLAC report, in 2021 Trinidad and Tobago lost almost $18 billion in revenues from LNG due to transfer pricing between the years 2010 to 2018,” Manning said.
He labelled this an extremely significant issue, saying that ECLAC had advised that any framework to address transfer pricing in T&T should require the conduct of transactions by multinationals at “arm’s length.”
“The matter of the introduction of transfer pricing legislation in Trinidad and Tobago is currently before the Cabinet,” Manning said.
He said between 2017 to 2019, the Finance Ministry held multiple consultations with regional and international institutions, chief among them, the Inter American Centre of Tax Administration and the World Bank.
“The objective was to establish new policy and legal administrative frameworks to regulate transfer pricing and to strengthen the Inland Revenue division’s ability to monitor transfer pricing transactions,” he said.
He said the Cabinet is considering introducing transfer pricing legislation similar to that implemented in Jamaica.
