The 2017 budget is due to be presented on Friday, 30 September 2016 to an anxious nation. Having had to endure the literally unbelievable optimistic economic claims of the previous government prior to the September 2015 general election, we were told by then Central Bank Governor, Jwala Rambaran, in December 2015, that the nation had been in recession for 6 months. I tell you. Of course that message has now been repeated after the messenger was dismissed for various alleged offenses, but that is for another column.
Our levels of public expenditure have moved sharply upward, with only a single decline in 2010, as shown in the graph and table for 2005-2016. Those totals are derived from the estimates stated in the various budget statements and do not represent the actuals. In that period, estimated revenue was $534.57Bn with estimated expenditure of $574.6Bn. That balance between revenue and expenditure yielded a combined deficit of $40.125Bn – 84% of which ($33.67Bn) occurred under the Peoples Partnership government, 2011-2015.
|Revenue (millions TT$)||$24,016||$34,129||$35,126||$40,381||$49,465||$36,664||$41,284||$47,000||$50,736||$55,041||$60,351||$60,287|
|Expenditure (millions TT$)||$27,918||$34,119||$38,054||$42,261||$44,206||$36,915||$49,016||$54,600||$58,405||$61,398||$64,664||$63,048|
We have heard of the collapse in our energy revenues and the Central Bank’s Economic Bulletin of July 2016 which stated –
“…Provisional estimates from the Central Bank’s Index of Real Quarterly GDP indicate that domestic economic activity declined by 5.2 per cent (year-on-year) due to declines in both the energy (9.1 per cent) and Non-energy sectors (2.8 per cent)…” (pg 2)
It seems clear that serious adjustments to the levels of State expenditure must now be made to cater for our reduced income and limited prospects.
The main messages which I would wish to hear in the upcoming budget statement are –
- Public Procurement and Disposal of Public Property Act – This critical law is long-overdue and intended to control the runaway waste and theft of Public Money which has beset our country. The amendments proposed by the PNM government were approved by Parliament and assented to by President Carmona on Friday 17 June 2016, so the real goal here has to be rapid and effective implementation. Before the new regime can be implemented there are several steps to be taken – the Board of the Office of Procurement Regulation is to be appointed by the President; the regulations by which the act will take life have to be written; staff have to be appointed; Procurement Officers in the Public Service, State Enterprises and various Statutory Agencies will have to be trained to the proper standard; offices, stationery, website, vehicles and telephones all have to be arranged. We were recently told by the AG that the regulations have been written. The other details remain unclear, but the AG also stated that the goal was to have the new system operating by January 2017.
- VAT – The reduction in VAT from 15% to 12.5% was anticipated to yield an additional $4.0Bn in revenue and I would be interested to see what was the actual outcome.
- Property Tax – The 2016 budget stated that property tax would be implemented rapidly –
“We will take steps to amend certain legislative provisions, including the determination of rates, and implement the existing Property Tax Act 2009 with a view to having a fair and equitable property tax regime in place by January 1, 2016, using the old levels and old rates as a starting point. (pg 37 of the 2016 Budget Statement)”
There has been no property tax in our country since 2009 and that failure or refusal to implement this tax has resulted in an annual loss to the Treasury of the order of $150M – given that we have now gone seven years with no property tax, that is a minimum of $1.0Bn in lost revenue. Even as a property professional, it is entirely unclear to me why this important tax remains languishing and unimplemented. One would really hope for some clarity from the Minister on this issue.
- Taxation of Rental Income – Finally, there is the other property tax, the one no one talks about, certainly not our successive Ministers of Finance. I am speaking about those persons who earn rental income from properties and very few of whom pay the income taxes which are due. This is a literal low-hanging fruit since the law is already in place, so we don’t have to go through more painful Parliamentary antics. The law just needs to be implemented for the substantial rents collected in this country every year to be taxed by our stressed Treasury at 25%.
We need to adjust and we need to adjust now.