PORT OF SPAIN, Trinidad, Wednesday December 30, 2015 – Land and building taxes will be restored from next month; the Value Added Tax (VAT) regime will be revised; and ministries, statutory boards and other government agencies will have to cut expenses, as government tries to make up for significant drop in oil and gas earnings.
But Prime Minister Dr. Keith Rowley has promised there will be no job cuts as part of the cost-cutting measures at this time.
In an address to residents of the oil-rich twin-island republic, broadcast on radio and television last night, Rowley said the continuing fall in oil and gas prices had resulted in a significant drop in the country’s export earnings, and with prices not expected to recovery any time soon, the government had to take action.
In June 2014, the price of West Texas Intermediate, (WTI), Trinidad’s benchmark crude oil, was US$106 per barrel. In December 2014, it had declined to US$59 and it is now in the region of US$36 per barrel.
Similarly, Rowley added, the price of Liquefied Natural Gas (LNG) in the Japanese market decline from US$16.40/ mmbtu in June 2014 to US$15.70/mmbtu in December 2014 and is now around US$9.00/mmbtu.
“Fellow citizens, there is simply no way that other sectors of the economy can realistically be expected to compensate for the loss of export earnings from oil and gas; not in the short run and not even in the medium run. In the long run, yes, we do need to work towards building an economy with many different contributing sectors so that it becomes less vulnerable to these types of shocks. But the fact is, today, we are where we are,” the prime minister said.
He therefore announced that land and building taxes will be restored from January 2016 and the revised VAT regime will be implemented from mid-January.
Minister of Finance Colm Imbert will also be seeking to collect “considerable” arrears of taxes, Rowley said.
On the expenditure side, the prime minister disclosed that he has instructed Imbert to “direct the management of every state enterprise, statutory body and each ministry and the Tobago House of Assembly to review their operations and make identifiable adjustments of seven per cent reduction in proposed operating expenses (eliminating waste and/or inefficiencies) not relating to job cuts at this instance”.
Rowley said those should to be submitted to the Ministry of Finance by January 31 and the minister will indicate in early April what savings in expenditure he has been able to secure across the various ministries and government expenditure would be adjusted accordingly.
“We must all appreciate that the circumstances we now face as a nation require sacrifice and managed adjustment in our living standards for a period of time until the economy is successfully stabilized. If we fail to adjust now, we will find ourselves as we did in 1986 with an economy with insufficient foreign exchange reserves and having to restructure our debt under a series of IMF programmes,” he cautioned.
“This administration will not take this country back to that kind of situation. But success will require sacrifice and adjustment on the part of all sections of the national community.
“The adjustment in spending that is required can be nullified by increases in wages and in profits. The Government will initiate tripartite discussions with the labour movement and the business community with the objectives of maintaining employment as far as possible, moderating demands for wage increases, and discouraging excessive profits,” the prime minister added.
Rowley said government will also be encouraging investment in foreign exchange earning activities during the adjustment period.
He said additional and more detailed measures will be announced by the Minister of Finance in his mid-year review.