2017 Budget Review

The 2017 budget was presented on Friday 30th September 2016, with the known decline in State revenue having the expected impact. As shown in the graph and table, the Estimate of Revenue is now down to $47.4 Billion, which is itself a doubtful figure as I will show, with Estimated Expenditure at $53.475 Billion. That means the 2017 budget is being deficit financed by $6.075 Billion.
05-17_budget

Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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 $47,400
Expenditure (millions TT$) $27,918 $34,119 $38,054 $42,261 $44,206 $36,915 $49,016 $54,600 $58,405 $61,398 $64,664 $63,048 $53,475
Surplus/Deficit
(millions TT$)
-$3,902 $10 -$2,928 -$1,880 $5,259 -$252 -$7,732 -$7,600 -$7,669 -$6,357 -$4,313 -$2,761 -$6,075

At pg 42 the Estimate of Revenue is explained –

“…In 2017, core revenue…is only projected to be…$37 billion, $20 billon (sic) less than just two years ago. This leaves a fiscal gap in 2017 of over $16 billion…”

At pg 41 the funding of the deficit is explained –

“….This 2017 figure includes…$9.69 billion from one-off revenues;…”

At pg 45 the details of the proposed asset sales were given –

Company Asset to be sold Estimated Revenue $Millions
T&T Natural Gas Ltd (TTNGL) State’s remaining 51% share $1,500
First Citizen’s Bank Ltd (FCB) 20% of the State’s shares $1,500
ETECK 50% of its Industrial Estates $500
Trinidad Generation Unlimited (TGU) 20% of the State’s shares $600
Lake Asphalt Ltd Partial divestment
(%age not stated)
Unstated

Those estimated receipts total $4.1 Billion, which leaves a gap of $5.59 Billion when compared to the estimate of $9.69 Billion in ‘one-off revenues’ as stated at pg 40.

At pg 45 in concluding the description of the proposed sale of assets –

“…The Government also intends to pursue in 2017 the partial divestment of Lake Asphalt to an International Strategic Partner…”

The proposed partial divestment of Lake Asphalt is of particular concern to me since it was reported in this newspaper on 31st May 2013 that –

“…According to a release from Lake Asphalt of Trinidad and Tobago (1978) Ltd, the signing ceremony of a Memorandum of Understanding and a Confidentiality Agreement with Beijing Oriental Yuhong Waterproofing Technology Co Ltd of the People’s Republic of China is scheduled to take place at the Hyatt Regency, Port of Spain…”.

Also –

“…One of the official objectives of the February 2014 State visit to China, according to the Office of the PM, was ‘…Removal of asphalt from the Pitch Lake in greater capacities…’”.

The Pitch Lake is a strategic national asset, so if its partial divestment is being considered that should be conducted in a transparent and competitive manner. Quite frankly, when one considers the stated proposal against the known background, it resembles a ‘sole selective’ situation of which we should be extremely skeptical since it lacks the necessary competition to ensure value for money in the Public Interest.

The other noteworthy points were –

  • Public Procurement and Disposal of Public Property Act – The Minister committed (pg 6) to have this long-overdue law implemented within six months. I welcome that, with one serious caution. One can only hope that the imbroglio which seems to have engulfed our President and Prime Minister does not adversely impact public confidence in the Board of the Office of Procurement Regulation. That Board is to be appointed by the President, after consultation with the PM and the Leader of the Opposition. Public confidence is a tantalisingly fickle element in matters of State and after a certain point has been passed, the benefit of the doubt can be the most elusive, possibly irretrievable, part of the scenario.
  • NIDCO on the Point Fortin Highway project – Having recovered some $670M in performance bonds, with a further $250M still under litigation, NIDCO was stated to be poised to embark on completing the highway and it is intended to invite participation of local contractors.
  • VAT – The reduction in VAT from 15% to 12.5% was anticipated to yield an additional $4.0Bn in revenue, but at pg 12 –

    “…There was a sizeable shortfall in value-added tax collections, compared with the projections made at the time of 2016 Budget. The analysis…suggests that apart from the downturn in the economy, tax evasion related to value-added taxes continues to be a major issue;…”

    One would hope that the proposed introduction of a Revenue Authority (pg 42) will minimise this tax evasion.

  • Property Tax – At pg 42 the implementation date was set for 2017.
  • Taxation of Rental Income – There was no discussion of income tax on rental income.
  • Housing – At pg 30 a variety of home ownership options were outlined, but there was no mention of the provision of rented homes, so that is for another column.
  • Housing Bonds – At pg 26, the issue of housing bonds was proposed, which is fruitful approach to incremental home ownership, reminiscent of the ideas advanced by the late Lloyd Best.

The Sandals issue will also require further treatment.

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