(Trinidad Guardian) While an estimated 1,300 businesses will no longer have to pay Value Added Tax (VAT) from next month, thousands of citizens will have to dig deeper in their pockets to buy several items, such as rice (except parboiled and boiled), flour (except all purpose and wheat), coffee, orange and grapefruit juices, mauby, tea and tomato ketchup.
This, as these items are among those that will no longer be VAT zero-rated when the new 12.5 per cent rate of VAT is effected on February 1.
This is according to Finance Minister Colm Imbert who presented the Finance Bill 2016 for debate in the House of Representatives yesterday. While the measure also seeks to reduce the 15 per cent VAT to 12.5 per cent, Imbert said that would not result in lower gas prices.
“Even though we are reducing the rate of VAT from 15 per cent to 12.5 per cent, this will not result in the price of petroleum products.
“Instead we will adjust the duty on petroleum products so that the prices at the pump will remain the same as announced in the national budget,” he said.
Imbert said the country expected to suffer a shortfall in oil revenue of TT$2.4 billion this year if oil prices remained depressed at about US$40 a barrel. Imbert said the price of West Texas Intermediate yesterday was US$31.05 a barrel.
“This dramatic energy price shock, combined with a steady reduction in domestic production, is having a debilitating impact on our fiscal and external accounts and there will be spill over effects on level of economic activity and employment,” Imbert said.
The minister said tax collections from the energy sector averaged TT$26 billion or 16 per cent of GDP over the period 2010 to 2014 but fell to TT$19 billion in 2015 or 11 per cent of GDP.
He said current projections were that it would fall further to TT$12 billion or seven per cent of GDP.
He said those figures were for the entire energy sector, including natural gas.
Imbert said the bill sought to reform the Value Added Tax regime, increase in personal allowance for lower income wage earners, increase in the Business Levy and the Green Fund, increase personal allowance from TT$60,000 to TT$72,000 and remove the need for citizens 60 years or over to pay for passports and drivers’ permits.
Imbert said there was no provision in the bill for the reintroduction of the Property Tax
“This debate is not about Property Tax,” he insisted.
Imbert told legislators: “We are also proposing an increase in the threshold for VAT registration from TT$360,000 to TT$500,000. This increase will reduce the population of VAT taxpayers by 1,300 easing the compliance burden on the smallest enterprise and improving VAT administration.”
But Imbert said: “This increase in the threshold to TT$500,000 should not affect revenue significantly, since based on data the largest ten per cent of VAT taxpayers account for 95 per cent of total sales.”
Imbert said the Business Levy was being increased from 0.2 to 0.6 per cent on gross sales to spread the burden of adjustment in the country.
He said that levy was paid by people or a company.
“If you do not declare a profit and you do not pay income tax addresses businesses that simply do not declare profits. They have sales which could be substantial but they declare losses continuously.
“You have businesses with very large turnover, which mysteriously do not declare profits year after year after year,” he added.
Imbert said the Green Fund was also being increased to allow the Government to access it as currently the Government could not access the fund, which, he said, previously was “mortgaged” by the former PP government.
Dealing with the Property Tax, Imbert said it would be reintroduced at the rate that was paid in 2009.
He said the Government would bring amendments to the Property Tax legislation to resolve the current misunderstandings about its intention.
Imbert said the valuation process would continue in 2016 and “we will adjust the percentages, the formula and the method of calculation used in the Property Tax to ensure there is fairness, equity and affordability and ensure that those who are least able to afford an imposition of a tax are relieved from this responsibility.”
Imbert said legislation would be brought to the Parliament in March. He said a second Finance Bill 2016 would be brought to the Parliament next month with incentives to stimulate the construction industry, particularly to facilitate the participation of the private sector in the housing construction sector
He said the mid-year review was expected in April, adding that the Gambling and Betting Bill, legislation to separate the Heritage and Stabilisation Fund Act were expected to be brought to the Parliament by June.
