Viewpoint: Brian Hackett
Traditionally, T&T has generated the majority of its revenue from its once buoyant oil sector, and more recently, from natural gas. Despite recent growth in the manufacturing and non-energy sector, as well as the current administration’s attempt to curtail spending, the decline in revenue from oil and gas streams has seen successive administrations struggle to effectively implement fiscal measures to keep the economy afloat. For example, despite amendments to the property tax legislation, mechanisms are not yet in place to assess and/or collect property taxes. The government is also struggling to address money laundering, with the Central Bank of T&T recently introducing a new TT$100 bill as legal tender in an effort to stymie the negative effects it causes. An increase in natural gas output, coupled with rebounding commodity prices, saw central government revenue total TT$35.8bn ($5.3bn) in the first 10 months of FY 2018/19, as energy revenue rose by 24.7%. At the same time, non-energy receipts increased from TT$23.2bn ($3.4bn) to TT$24.5bn ($3.6bn), primarily on account of higher non-tax revenue. In contrast, revenue from taxes on goods and services fell by TT$1.1bn ($162.5m), due in large part to a decline in net value-added tax (VAT) collections on the back of an increase in VAT refunds.
Despite the increase in energy receipts, however, the government projected a higher budget deficit for FY 2018/19 than was initially expected. Total expenditure was, therefore, revised upwards by TT$300m ($44.3m) to ensure funding of several infrastructure projects and payment of arrears to commercial suppliers and contractors. The higher expenditure resulted in an overall deficit of TT$4.5bn ($664.7m), or 2.8% of GDP, at the end of FY 2018/19, compared to the TT$4.1bn ($605.7m), or 2.5% of GDP, that was originally budgeted. Considering the context of the local economy, this was a somewhat credible outcome. With an increasing budget deficit, the private sector has made calls for the introduction of the T&T Revenue Authority (TTRA). Indeed, since 1995 a number of efforts have been made to implement meaningful changes in the national tax administration system. However, these efforts have been largely unsuccessful. The constraints inherent in the existing legal and regulatory system limit its ability to enact necessary changes in the areas of human resource management and corporate performance, or to improve accountability in others. As of early 2020 the T&T Revenue Authority Bill 2018 was under debate in the House of Representatives.
There are many benefits to the digitalisation of tax payments, most notably the ease in which domestic businesses can comply with tax obligations. Countries like Côte d’Ivoire and Pakistan have seen the number and size of payments increase with the introduction of digital options from commercial banks. Taxes such as VAT, property tax, payroll tax and corporate income tax are all facilitated digitally. Improved electronic payments also reduce the time needed to comply. Furthermore, countries like Brazil, for example, saw a reduction of up to 23% in compliance timeframes between 2016 and 2018. It should be noted that reductions in compliance timeframes have also been facilitated by improved bookkeeping systems and other structural changes. Other benefits include decreases in filing errors, which give the authority a greater ability to analyse data, and lead to improvements in risk assessments and audits.
Introduction of the TTRA will not come without challenges, however, as there needs to be proper infrastructure in place to facilitate online tax payments. Competent staff and adequate compensation packages must also be offered in order to attract well-qualified practitioners and ensure the proper functioning of the authority. In addition, government intervention in the operation of the tax administration should be consistent and well defined. Whatever the challenges moving forward, as natural gas output continues to be uncertain and global commodity prices remain somewhat volatile, the need for faster collection of taxes will remain of paramount importance to the government.
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