Mr. Speaker, in the 2005 Budget Statement I indicated
that a Tax Reform Steering Committee had been established
in the Ministry of Finance to address the reform and simplification
of the non-energy tax regime. The Committee, with technical
assistance from the International Monetary Fund (IMF),
has submitted a number of recommendations. The Government
plans to implement some of these with effect from the
coming year, others are being considered for implementation
on a phased basis over the next several years.
The Committee noted that at the personal level the current
direct tax regime was overly complex with too steep a
tax rate structure at the lower income end, and contained
too many special purpose allowances. The Committee also
observed that at $25,000, or about 40 percent of per capita
GDP, the personal allowance was low by international standards.
As for the corporate tax regime, the current structure
was seen to be competitive both regionally and internationally.
However, the Committee felt that a regime based on more
generous depreciation and investment tax credits would
be more attractive to current and potential investors
and would bring greater benefits to the economy.
Mr. Speaker, the Committee found that while the indirect
tax regime was in line with international best practice
in most instances, the performance of indirect taxes lags
behind that of other countries of similar economic position.
This was due to a number of weaknesses in the design of
the tax regime, particularly as these relate to the level
of excise tax rates, the extent of the current zero-rated
list of goods and services under the VAT system, and the
level of VAT refunds.
The Committee also recommended that the Government look
at ways to expand the tax base through:
(i) a comprehensive capital gains tax;
(ii) a complete overhaul of the present property tax system,
following a comprehensive island-wide cadastral survey.
Mr. Speaker, tax reform is a continuous exercise and we
have started the process. Given the importance of a modern,
effective and efficient tax regime in achieving our economic
and social objectives, the Government proposes to establish
in the Ministry of Finance, a Tax Policy Unit, with a
mandate that includes the continuous reform of the tax
regime in Trinidad and Tobago.
The Cabinet has, however, decided to introduce a number
of tax measures in the coming fiscal year. Several of
the measures are geared to simplifying the current system.
We have prepared an appendix with the whole list of measures
for circulation to Members of Parliament. I would, however,
like to announce the major ones in the package.
Mr. Speaker, given the deficiencies in the Personal Income
Tax System identified by the Steering Committee, I propose
to increase the personal allowance from $25,000 per annum
to $60,000 per annum with effect from income year 2006.
Accordingly, the following allowances and deductions will
* The personal allowance of $40,000 per annum for individuals
age 60 and over;
* The child allowance of $1,200 per child;
* The Mortgage Interest Deduction;
* The tax-free withdrawal from pension funds and deferred
annuity plans for the purchase of a first house;
* The $10,000 deduction for credit unions and co-operatives;
* The 25 percent investment deduction in respect of equity
investments in hotels.
In addition, I propose to replace the current rates of
Personal Income Tax of 25% and 30% with a single rate
of 25 percent.
Mr. Speaker, these are significant measures indeed as
they will put an estimated 300,000 taxpayers out of the
income tax net altogether. In addition, everybody will
pay a flat rate of 25 percent.
The change will result in an important simplification
of the tax regime in that instead of the series of deductions
which only benefit specific individuals, all wage earners
will now get expanded relief. This means, Mr. Speaker,
leaving much more of the workers' wages in their hands,
so that they could improve their welfare and the welfare
of their family.
Mr. Speaker, this Government has considered the matter
in depth and we believe that it is one of the best ways
of having the broad mass of the population share in the
benefits derived from the high oil prices. This is the
concept of the energy dividend. The revision has another
important effect. By simplifying the tax, not only have
we made it easier for the taxpayer but we have also made
it easier for the staff of Inland Revenue Department,
who can now devote more of their energies to ensure compliance.
At the same time, Mr. Speaker, the Government has sought
to tidy up a number of issues relating to in-kind benefits
and the taxation of annuities, pension contributions and
Mr. Speaker, in order to modernize and strengthen the
effectiveness of the Corporation Tax structure, we propose
to amend the Tax Regime as follows:
i. Reduce the corporate tax rate from 30 percent to 25
percent to keep it in line with the personal income tax
ii. In the case of businesses registered under Section
16A of the Income Tax Act; i.e., an approved small business,
an approved company carrying on business in a regional
development area, and an approved activity company, we
propose to reduce the existing rate to zero percent for
a period of five years commencing the First of January
2006. Furthermore, these businesses will be exempted from
the Business Levy for a period of five years also commencing
from the First of January 2006. In effect Mr. Speaker,
there will be four rates of Corporation Tax:
a. Zero percent for businesses registered under Section
16A of the Income Tax Act;
b. 25 percent for non-energy and non-petrochemicals companies;
c. 35 percent for petrochemicals companies; and
d. 50 percent for energy (oil and gas) companies.
Mr. Speaker, the package of measures also includes initial
steps to transform the incentive regime. In essence, we
plan to terminate several tax holidays for new investors
(except for tourism projects under the Tourism Development
Act) and to consolidate the remaining provisions relating
to investment incentives and depreciation regimes.
One final word on taxation, Mr. Speaker, and it has to
do with gambling. As you know, gambling is against the
laws of Trinidad and Tobago and this Government is determined
to uphold the law. There has unfortunately been a proliferation
of gambling activity under the guise of private members
clubs. Over the years we have sought to use financial
mechanisms to contain the number of such clubs without
The new approach we intend to take is to bring all private
members clubs under a strict licensing arrangement to
be administered by the Ministry of Finance. Under the
proposed licensing regime, only genuine private Members
Clubs will be permitted to operate and there will be restrictions
on the types of activity in which they can legitimately
Mr. Speaker, food prices have doubled over the past ten
years. Even while overall inflation has been contained
over the last five years or so, rising by an average of
4 percent per year, food prices over this same period
increased by 12 percent a year. The main factors behind
this rapid rate of increase include increasing non-oil
commodity prices such as corn, wheat, soyabean; declining
domestic agricultural production; annual floods combined
with poor drainage; and high shipping costs due in part
to rising energy costs.
In July of this year, the Government established a sub-Committee
to examine initiatives to deal, once and for all, with
the problem of rising food prices. Having studied the
Committee's report, the Cabinet has agreed to implement
the recommended strategy which includes (i) the provision
of short term targeted and conditional cash transfers;
(ii) the reduction or removal of duty on selected food
imports; (iii) the use of a restructured NAMDEVCO strategic
market intervention as needed, through the bulk buying
of basic and agricultural foods.
The medium to longer term plan of action will be geared
towards boosting domestic agricultural production. As
discussed earlier, this longer term plan involves measures
and infrastructural improvements for the agricultural
sector; increasing the supply of micro-credit and grants
to entrepreneurs involved in agriculture; expanding the
role for NAMDEVCO to include the administration of guaranteed
floor prices for target crops and the promotion of agricultural
processing and the establishment of a mechanism for agricultural
Mr. Speaker, the proposed cash transfer through a Smart
Card will target about 60,000 families. The Smart Card
will allow for the purchase of food on a defined list
of items of $300 for families of 3 or fewer persons; $400
for families of 4 to 5 persons; and $500 for families
with 6 and more persons.
An integral requirement of the programme will involve
participation in training. We are targeting implementation
by March 31, 2006.
The Ministry of Consumer Affairs will engage a Consultant
to detail both the criteria and systems in accordance
with best practices for the administration of the programme.
There will be proper interface through the Ministry of
Community Development and the Ministry of Social Development.
The SMART Card programme will replace the Food Hamper
The Budget Estimates for Fiscal Year
Mr. Speaker, as in the past few years, the 2006 Budget
estimates provide for a small surplus of $9.8 million,
after an allocation to the Revenue Stabilisation Fund.
Mr. Speaker, total revenue for fiscal year 2006 is forecast
at $34,129 million while total expenditure for the year
is Budgeted at $34,119 million, of which $2,625.3 million
is appropriated for interest payments. The expenditure
level also includes an amount of $1,862.8 million to be
allocated to the Revenue Stabilisation Fund.
In line with international best practice, the revenue
projections are predicated on the long term projected
oil price, which for our mix of crude oil is about US$45
per barrel. With oil prices currently at about US$65 per
barrel, the reason behind these obviously conservative
oil price assumptions is to maintain a disciplined expenditure
profile and to avoid the need for expenditure cuts in
the (admittedly unlikely) event that oil prices fall below
On the other hand, our expenditure programme is based
on an oil price of US$35 per barrel. The difference between
the revenue price and the expenditure price is estimated
at $ 1,862.8 million is allocated to the Revenue Stabilisation
Oil revenue is projected at $18.1 billion, compared with
$11.1 billion in the previous year while non-oil revenue
is $16.1 billion compared with collections of $17.1 billion
in fiscal year 2005.
Mr. Speaker, our forecast for oil revenue includes an
amount of $1billion arising out of the introduction of
the new oil tax regime. Of course, given the progressive
structure for the new tax regime, if oil prices turn out
to be higher, our tax collections will increases correspondingly.
The new gas tax regime will have an even larger impact
on our tax collections. As I indicated earlier, previously
our gas taxation was based on transfer prices which were
considerably lower than the actual prices at which the
gas was sold. With the new tax regime based on the concept
of fair market value, the increase in revenue attributable
to the new gas regime, is about $2 billion.
Mr. Speaker, the projected decline in non-energy tax collections
is attributable to the significant tax relief that this
Government has decided to give to the broad mass of taxpayers,
but particularly to the middle-income taxpayer. The cost
of the tax relief has been estimated at $1.7 billion,
on a net basis.
Mr. Speaker, the expenditure profile for fiscal year 06
is fully in line with the strategy and priorities as outlined
in this Budget. As I said earlier, Education and Training,
National Security, Housing, Agriculture and Social Services
are the areas of main focus. The specific allocations
in these areas are:
* $5007.7 million to Education and Training (i.e. combining
the Ministry of Education and the Ministry of Science
* $2992.7 million on National Security
* $502.2 million on Housing
* $602.2 million on Agriculture
* $1718.5 million on Social Services
In terms of the Economic Classification, total expenditure
is made up of:
Personnel Expenditure 6,176.7
Goods and Services 4,019.4
Minor Equipment Purchases 307.2
Current Transfers and Subsidies 14,761.8
Acquisition of Existing Buildings 21.2
Current Transfers to Stat. Brd 4,078.5
Debt Servicing 5,052.1
Total Recurrent Expenditure
(incl. Cap Repayments) 34,416.9
Less Capital Repayments and
Sinking Fund (2,291.8)
Fiscal Operations 32,125.1
Dollar for Dollar
Green Fund 150.0
Unemployment Fund 344.0
Total Expenditure 34,119.1
Mr. Speaker, included in the current transfers and subsidies
is the sum of $2.3 billion for transfer to the Infrastructure
Development Fund to meet capital expenditure in fiscal
Mr. Speaker, let me end this presentation in the same
way I began, perhaps using different words but reinforcing
the unwavering determination of this Government to achieve
Mr. Speaker, we are giving top priority to the security
of the State which is Government's first responsibility
to our people. We must be able to walk the street in safety
and enjoy our homes in comfort. Despite the obstacles,
with the cooperation of all it will be an objective we
shall achieve. We cannot fail.
We will work to strengthen families as this is the surest
way of strengthening our communities.
We will pursue with a passion our efforts to assuage the
concerns and fears of the citizens. We must regain the
respect and thrust of each other and, as the challenges
arise - which they will, we must put on our tall boots,
go into the communities and work with our people. We will
make Trinidad and Tobago the paradise it can be. This
is not only a task for the Government, it should be a
determined resolve for all our citizens.
But to achieve this requires a change in attitude, a commitment
and determination by each one of us to be our brother's
keeper. I cannot overemphasise the importance of this.
It requires that each day we must be better that the last
* a return to the basics of wholesome family life;
* driving carefully on the roads;
* going to worship;
* respecting and caring for our elders;
* Teachers comporting themselves in an exemplary manner
to earn respect
* Students obeying laws;
* Helpful police officers;
* Respect for authority;
* Offering of prayers and supplication;
* And going the extra mile.
No Budget and sums of money can replace these challenges.
Let us remember Louisiana.
There must be a return to soul ..... to conscience.
This requires unity and not division and I close, Mr.
Speaker, by reminding this Honourable House that this
is our country - this is our Trinidad and Tobago.
To make it better should be our resolve, our commitment.
And, we can achieve this through a return to basics. There
is no other way.
I beg to move.