Gas prices increased yesterday, former property tax levels return from January 2016 and NIS contribution rates rise next July but the new People's National Movement Government's first Budget has kept various election promises, including VAT reduction, increased retirees' benefits and certain personal tax exemptions.
This despite a negative picture of the economy painted by Finance Minister Colm Imbert, whose two-hour Budget presentation, carried from the start, a running theme of economic mismanagement by the past People's Partnership administration.
Saying the economy is in an "even more perilous state" than the new Government first envisaged, he added: "In order to maintain its inordinate and unsustainable levels of expenditure, the previous government maxed out our overdraft at the Central Bank, taking us from a positive cash position in 2010 to a perilous situation in 2015, where we were running on 'fumes', dangerously close to the legal overdraft limit."
Presenting a $63 billion Budget to see T&T through 2015- 2016, Imbert, in Parliament, added: "...We have laid bare the true state of T&T's finances... we believe that in order to pull ourselves out of the difficulties which the previous administration has put this country in, through corruption and rampant squandermania, we require the collective efforts of all... "I wish to make a clarion call to all to rally around our programme and policies. Our Budget theme reflects this vision: Restoring Confidence and Rebuilding Trust – Let's Do This Together."
The PNM's Budget is smaller than the PP's last 2015 Budget of $68 billion.
It also carries a smaller deficit – 1.7 per cent of Gross Domestic Product (GDP) – than the last PP deficit.
Following wide consultations over the next six months on the state of the economy and T&T's financial challenges, Imbert said Government would make appropriate budgetary adjustments "if required" in the March 2016 mid-year review, to ensure the Budget is a comprehensive regime for restoring long-term discipline.
Presenting the package a month after PNM's September 7 election victory, Imbert said Government relied heavily on policies and programmes of its 2015 election manifesto.
The Budget was based on an oil price of US$45 and gas price of US$2.75 per mmbtu.
National security received the largest allocation, $10 .810 billion.
Among announcements affecting the public pocket, effective yesterday, the price of super gas increased by 15 per cent from $2.70 a litre to $3.11 a litre. Diesel gas also increased from $1.50 a litre to $1.72 a litre.
Imbert said that would reduce the fuel subsidy by $340 million. He said annual subsidies have placed consistent, adverse pressure on T&T's fiscal accounts. Government is embarking on a fuel subsidy regime in consultation with stakeholders soon, he said.
The existing Property Tax Act (2009) will also be implemented "with a view to having a fair and equitable property tax regime in place by January 1, 2016, using old levels and rates as a starting point."
Special provisions will be put in place to ensure the elderly and indigent with fixed low incomes are not disadvantaged wherever they may reside, he said. Imbert added that the PP's removal of the tax had cost $1 billion. To obtain its fair share of taxes from the gaming sector, Government will also expedite gaming legislation and implement a gaming regulatory system next year.
The PNM's planned Revenue Authority will also be re-started and should be in place by next September, he said.
Imbert added that he would introduce National Insurance System legislation to increase all earnings class limits by 13.5 per cent, with the maximum insurable earnings class limit increasing from $12,000 to $13,600. He said NIS contribution rates will also be increased from 12.0 per cent to 13.2 per cent effective July 4, 2016.
?In keeping with the party's election promises, Imbert said effective December 1 the cap on joint incomes received by retirees regarding NIS and old age pension will be $5,000, giving recipients an additional $500 monthly.
From January also, a retirees benefits programme being created will provide free drivers' permits and passports for those 60 and over. Discounts on utility bills for other categories of retirees will be introduced later.
While reducing the 15 per cent VAT rate to $12.5 per cent and increasing the threshold for VAT registration from $360,000 to $500,000, from January Imbert said he intended to broaden the VAT base by reviewing and adjusting exemptions and zero-rated items (luxury/non essentials).
Government also increased personal income tax exemption limits from $60,000 to $72,000. Effective January 2016, this exempts from tax all taxpayers earning $6,000 monthly and less.
Saying the foreign exchange situation is untenable, Imbert said the Central Bank would be told to re-establish the Forex distribution which existed prior to 2014. The bank will also be asked to clear the backlog of arrears of Forex demand, ensure legitimate demands are met and ensure the stability of the exchange rate.
He assured Government would make its best efforts to bring the Clico matter to an amicable conclusion.
Government also intends to give the Judiciary the financial autonomy it has requested, including to manage its resources, procurement and construction of facilities. This is projected to be achieved by the end of 2016.
Discussions have also started with the Inter Development Bank on an affordable mass transit system option. An investment decision is expected before the end of the fiscal year.
Imbert's detailed accusations of PP economic mismanagement included that public expenditure rose 33 per cent over the last five years, from $46.7 billion in 2010 to $62 billion for 2015.
He added: "Notwithstanding billions of dollars in borrowings, tax amnesties, extraordinary dividends, sale of assets and high oil and gas prices, our cash balances at the Treasury moved from a positive $6.5 billion on May 24, 2010, we were in credit then, to a negative of $8.5 billion in the middle of September 2015, a reversal of $15.0 billion.
"What this means is that we are unable to use the resources of our surplus funds, including the Green Fund or the Unemployment Fund, since they are pledged against the overdraft and are unavailable for drawdown."
He said the PP had also left the PNM with $5 billion to be paid on collective agreements.
Saying T&T needs a programme of economic adjustment, Imbert called on the private sector and labour movement to work with Government on solutions. He said the economy's recovery would depend critically on the private sector's reaction to the improved business environment and other measures being introduced.