Following on from our previous blog entry, we continue our look at the 2021 National Budget of the Republic of Trinidad and Tobago – Resetting the Economy for Growth and Innovation Part 2.

TT$50 million will be allocated for the acquisition of computers for needy students. 

To underpin and support this measure on the 5th September 2020, all taxes on computers and tablets was removed. 

As part of GORTT’s digital thrust, the provision of internet will be expanded through the Adopt a School Initiative and teachers will be educated in the field of information and technology through the ICT Teacher Professional Development Programme.

Under the Accelerated Construction Programme 25,000 new homes will be delivered by the Housing Development Corporation over the next ten years. 

HDC plans to:

• Construct 10,000 starter homes valued at TT$250,0000.
• Construct 5,000 affordable homes valued between TT$350,000 and TT$500,000.
• Construct 5,000 middle income homes valued between TT$650,000 and TT$900,000.
• Construct 5,000 housing units targeted at young professionals.

GORTT plans to encourage the private sector to deliver a further 10,000 housing units over the next ten years with the overall plan being to target the provision of housing for families who earn less than TT$10,000 per month.

Loan for new homeowners will be provided at a subsidised rate of 2% over 30 years with a down payment of 5% for those in the higher income brackets. To finance this initiative GORTT will provide a guaranteed loan facility to the HDC of TT$1 billion.

A consistent and reliable electricity service, an adequate water supply and efficient sewage treatment are considered by GORTT to be essential to the development of Trinidad and Tobago.  

They are also essential to assist with combatting COVID-19.

There is some bad news on this front. To improve each of the services, adjustments to the tariffs charged may be required.

A cabinet sub-committee is undertaking a review of the operations of WASA. This review includes an assessment of WASA’s unsustainable debt position, aging pipelines, governance structure and its inability to provide an adequate water supply. As mentioned above, the sub-committee are also looking at tariffs which likely means an increase in price to end consumers.

The Minister noted the improvements being made to the electricity transmission and distribution system with 99% of the country now being served with a more reliable service. 

An increase in electricity tariffs is also likely.

According to the Minister the government have launched a number of initiatives to make Trinidad and Tobago safer and secure. 

These initiatives include:

• A National Operations Fusion Centre (NOFC) is now in operation and a National Intelligence Fusion Centre (NIFC) is being established to share resources and intelligence to make the country more secure.
• Greater use of technology will be employed including the use of GPS tracking and real time cameras on Emergency Response Vehicles, body cameras on personnel and a greater use of drones for surveillance. 
• The provision of more resources to the Financial Investigations Branch to tackle money laundering and white-collar crime. This will involve hiring experts including lawyers, auditors and forensic investigators.
• Opening new state of the art police stations.
• Improving border security by improving radar systems and the acquisition of new vessels to patrol seawaters (these new vessels will arrive in 2021).
• Improved security systems in prisons.
• New fire stations in Penal and Roxborough and refurbishing of existing stations in Trinidad.
• The creation of a multi-agency border unit to tackle the illegal importation of drugs and firearms.
• Upgrading the Immigration Departments systems to improve efficiency.
• Establishing a Special Victims Department to comprise of the Child Protection Unit and the Sexual Offences Unit.
• Using virtual courts to adjudicate cases online.

The Minister made a number of significant announcements in respect of energy. These included:

• Heritage Petroleum has raised its average production rate to 34,900 barrels per day in the period October 2019 to September 2020 up from 32,971 barrels per day in the corresponding period for 2018-2019.
• Heritage Petroleum is now profitable posting a TT$1.4 billion profit and contributing TT$820 million in taxes and other levies to GORTT.
• Patriotic Technologies have until the 31st October 2020 to conclude the acquisition of the Point-a-Pierre Refinery after which GORTT will look at other options for the sale of the Refinery.
• Planning and execution of production from the Manatee Field is actively underway.
• Gas production has been stabilised and a royalty tax of 12.5% is earning income from the extraction of natural gas.
• Foreign direct investment of US$2.2 billion and US$2 billion is planned for 2020 and 2021.
• bpTT received ten-year extension of its exploration and production licenses in the Columbus Basis and southeast Galeota. All legacy issues were settled with bpTT through the payment of TT$1 billion by bpTT.
• BHP has announced a 3.5 trillion cubic feet gas find in its deep-water fields.
• A review of the Supplemental Petroleum Tax is being undertaken and the threshold for small producers will be increased to US$75 per barrel for fiscal years 2021 and 2022.
• GORTT plans further negotiations with the major oil and gas companies to secure a greater share of energy revenues.
• Trinidad and Tobago will be developed into a regional hub for energy services with a view to serving the emerging markets in Guyana and Suriname.
• GORTT is to implement renewable electric power. Two bidders are in competition to supply a Solar Project generating 112 megawatts of power to the electric grid. This will be the largest project of its kind in the Caribbean.

All allocations to Tobago are focussed on enhancing tourism. A new terminal at the A.N.R. Robinson airport is scheduled to commence in July 2021, and two new fast ferries will soon arrive to service the sea link between Trinidad and Tobago.

Incentives will be introduced to stimulate innovation among small and medium sized enterprises (SME’s), and the Tobago Agribusiness Development Company is being formed to provide special incentives to farmers, and to develop the agro-processing sector in Tobago.

The 2021 allocation to Tobago amounts to TT$2.134 billion, of which TT$200 million is for capital expenditure. This represents 4.3% of the national budget.

The Minister sent a message to Tobagonians who clamour for greater independence and an increased say in their own future. The Self Government Bill for Tobago is to be accorded the highest propriety but passing that bill will require cross party support to proceed further.

The Minister noted that the success of the initiatives contained in the budget depend on the ability to contain the COVID-19 virus and the availability of a safe and effective vaccine. 

Exceptional support and fiscal stimulus from GORTT will be required over the next two years to support the economy. 

This support will be geared towards:

• Increasing remote working capabilities of citizens.
• Assisting the unemployed to find work.
• Providing incentives to companies to create jobs.

In common with previous budgets presented by this administration, the minister reiterated that diversification of the economy is central to the future development of Trinidad and Tobago. 

Because GORTT’s revenue streams are constrained by low energy prices and stagnant economic activity as a result of COVID-19, most of these initiatives will be stimulated by providing the necessary incentives to the private sector.

Accordingly, GORTT plans to:

• Reduce red tape to make doing business in Trinidad easier.
• Supporting private sector initiatives to diversify the economy. Targeted areas include et al: energy services; aluminium and steel production and export; agriculture; software; mobile applications; music; film; ship building and repair; green technology and recycling; construction and housing.
• Reorganising the Port Authority by vesting managerial, operational and financial responsibility for operating the Port with a new investor by the end of fiscal year 2021.
• Liberalisation of the Liquid Petroleum Products Sector (LPPS).  From January 2021, GORTT intends to remove the fixed retail margins on all liquid petroleum products with dealers being able to establish their own margins. With oil prices at current levels this should not impact on petrol and diesel prices at the pumps, but as the benchmark oil price recovers prices at the pumps will likely rise in proportion to the increase in the underlying benchmark oil price. The production of liquid petroleum gas (LPG) will remain under the current subsidy mechanism.
• All gas stations owned by the National Petroleum Marketing Company will be offered for sale to the private sector with first preference going to existing operators.

Estimates of revenue and expenditure will be based on an estimate of US$45 per barrel and US$3.00 per MMBtu for oil and gas respectively.

Based on these assumptions total revenue is estimated to be TT$41.364 billion an increase of TT$7.304 billion over the revised outturn for fiscal year 2020. TT$9.265 billion and TT$0.905 billion will come from oil revenue and capital revenue respectively with the balance coming from non-oil revenue sources.

Total expenditure is estimated to be TT$49.573 billion (a decrease of TT$1.258 billion over the 2020 outturn). Spending on capital programmes is not expected to be affected.

The fiscal deficit is expected to decrease to TT$8.209 billion representing 5.6% of GDP compared to TT$16.772 billion for the outturn of 2020 (this represented 11% of GDP).

To fund the deficit GORTT plans to tap the domestic and international capital markets and access facilities available at international institutions (mentioned in an earlier blog entry in this series).

The Minister announced a number of initiatives to promote the digitalisation of Trinidad and Tobago’s economy. 

These initiatives include:

• The removal of all taxes on mobile and digital equipment including phones, computers and software.
• A 150% tax allowance up to a maximum of TT$3 million to businesses who invest in tech start-ups and new tech businesses.
• A similar allowance for businesses who engage in technology solutions and digitalisations.
• A tax allowance will also be provided to businesses which create employment in the technology industry especially those that employ young people. Again, the allowance is set at 150% with a cap of TT$3 million.

All of the above measure will take effect from 1st January 2021.

MIFI devices will be provided to 45,000 students based on need in order to provide them with access to the internet. The provision of Wi-Fi hotspots and internet cafes will be expanded in 2021 to remote areas.

The Minister announced a number of initiatives to promote property developments and to stimulate the housing market. 

These included:

• Removing value added tax on imported building materials for approved housing, commercial and industrial developments that start on or before 31st December 2022. This measure will take effect from the 1st January 2021.
• Increasing the stamp duty threshold for residential properties from TT$1.5 million to TT$2 million for first time homeowners. This also takes effect from 1st January 2021.

Increasing the rate of property development allowance from 15% to 20% of the capital expenditure incurred in the construction of commercial, industrial or multi-family residential buildings completed on or before 31st December 2024.

The TAUP scheme provides reimbursable grants to eligible tourism accommodation and will be expanded and extended. The extension will start on the 1st October 2020 and expire on the 30th September 2023.

With effect from the 1st January 2020 the rate of wear and tear on plant and equipment is increased from 25% to 30%.

Trinidad and Tobago as a country spends in the region of US$400 million per year importing on average 25,000 vehicles representing a serious – and in the Ministers view – unsustainable leak in foreign exchange.

To counter this leakage the Minister announced the removal of all tax concessions on the importation of private motor cars. 

Concessions for customs duty, VAT and motor vehicle tax will remain for commercial and industrial vehicles. 

In addition, the permissible age of foreign used cars imported into Trinidad and Tobago will be reduced to 3 years and the quotas for importing foreign used cars will be reduced by 30%.The removal of concessions and amendments to regulations will take place from the 20th October 2020.

Noting that to treat one cancer patient costs TT$500,000 per year, the Minister announced a number of measures to deter smoking. 

The measures include:

• Increasing excise duty by 20% on locally manufactured tobacco products.
• Increasing customs duty by 20% on imported tobacco from the common market.

These measures will take effect from the 20th October 2020.

With effect from the 1st January 2021, the VAT base is to be broadened to include imported luxury items including lobster, escargot, smoked salmon, clams, strawberries, champagne, apples and grapes.

YTEPP has partnered with the Commonwealth of Learning to make available a recovery programme that allows those who have lost their jobs or are in danger of losing their jobs to gain access to over 4,000 courses that would enable them to retrain to enter the job market. 

This free scheme will commence on the 1st January 2021 and conclude in September 2021.

Effective from the 6th October 2020, GORTT are freezing the filing of all vacant posts in the public sector. This freezing will last for one year.

To promote access to equity funding for small and medium sized businesses, GORTT will amend the Corporation Tax Act from the 1st January 2021 to:

• Increase the incentive period for listing from 5 years to 10 years.
• Provide a full tax holiday for the first 5 years of listing on the Trinidad and Tobago Stock Exchange (TTSE).
• Provide a 50% tax holiday for the second five years.

Effective from the 1st January 2021, the current tax allowance of TT$6 million will be increased to TT$12 million for corporate sponsorship of nationals operating in:

• The local fashion industry. 
• Audio, visual or video productions for the purpose of local education or entertainment.
• Local production companies in respect of their own productions.
• Companies which sponsor sporting activities, events, sportsmen or art and culture.

Effective from the 1st January 2021, the personal income tax allowance will increase from TT$72,000 to TT$84,000. 

This measure is expected to put additional income of TT$3,000 per year into the pockets of 250,000 taxpayers at a cost of TT$750 million.

The aim of this provision is to stimulate the demand side of the economy via an increase in personal consumption.