Gail Alexan­der

Gas prices in­creased yes­ter­day, for­mer prop­er­ty tax lev­els re­turn from Jan­u­ary 2016 and NIS con­tri­bu­tion rates rise next Ju­ly but the new Peo­ple's Na­tion­al Move­ment Gov­ern­ment's first Bud­get has kept var­i­ous elec­tion promis­es, in­clud­ing VAT re­duc­tion, in­creased re­tirees' ben­e­fits and cer­tain per­son­al tax ex­emp­tions.

This de­spite a neg­a­tive pic­ture of the econ­o­my paint­ed by Fi­nance Min­is­ter Colm Im­bert, whose two-hour Bud­get pre­sen­ta­tion, car­ried from the start, a run­ning theme of eco­nom­ic mis­man­age­ment by the past Peo­ple's Part­ner­ship ad­min­is­tra­tion.

Say­ing the econ­o­my is in an "even more per­ilous state" than the new Gov­ern­ment first en­vis­aged, he added: "In or­der to main­tain its in­or­di­nate and un­sus­tain­able lev­els of ex­pen­di­ture, the pre­vi­ous gov­ern­ment maxed out our over­draft at the Cen­tral Bank, tak­ing us from a pos­i­tive cash po­si­tion in 2010 to a per­ilous sit­u­a­tion in 2015, where we were run­ning on 'fumes', dan­ger­ous­ly close to the le­gal over­draft lim­it."

Pre­sent­ing a $63 bil­lion Bud­get to see T&T through 2015- 2016, Im­bert, in Par­lia­ment, added: "...We have laid bare the true state of T&T's fi­nances... we be­lieve that in or­der to pull our­selves out of the dif­fi­cul­ties which the pre­vi­ous ad­min­is­tra­tion has put this coun­try in, through cor­rup­tion and ram­pant squan­der­ma­nia, we re­quire the col­lec­tive ef­forts of all... "I wish to make a clar­i­on call to all to ral­ly around our pro­gramme and poli­cies. Our Bud­get theme re­flects this vi­sion: Restor­ing Con­fi­dence and Re­build­ing Trust – Let's Do This To­geth­er."

The PNM's Bud­get is small­er than the PP's last 2015 Bud­get of $68 bil­lion.

It al­so car­ries a small­er deficit – 1.7 per cent of Gross Do­mes­tic Prod­uct (GDP) – than the last PP deficit.

Fol­low­ing wide con­sul­ta­tions over the next six months on the state of the econ­o­my and T&T's fi­nan­cial chal­lenges, Im­bert said Gov­ern­ment would make ap­pro­pri­ate bud­getary ad­just­ments "if re­quired" in the March 2016 mid-year re­view, to en­sure the Bud­get is a com­pre­hen­sive regime for restor­ing long-term dis­ci­pline.

Pre­sent­ing the pack­age a month af­ter PNM's Sep­tem­ber 7 elec­tion vic­to­ry, Im­bert said Gov­ern­ment re­lied heav­i­ly on poli­cies and pro­grammes of its 2015 elec­tion man­i­festo.

The Bud­get was based on an oil price of US$45 and gas price of US$2.75 per mmb­tu.

Na­tion­al se­cu­ri­ty re­ceived the largest al­lo­ca­tion, $10 .810 bil­lion.

Among an­nounce­ments af­fect­ing the pub­lic pock­et, ef­fec­tive yes­ter­day, the price of su­per gas in­creased by 15 per cent from $2.70 a litre to $3.11 a litre. Diesel gas al­so in­creased from $1.50 a litre to $1.72 a litre.

Im­bert said that would re­duce the fu­el sub­sidy by $340 mil­lion. He said an­nu­al sub­si­dies have placed con­sis­tent, ad­verse pres­sure on T&T's fis­cal ac­counts. Gov­ern­ment is em­bark­ing on a fu­el sub­sidy regime in con­sul­ta­tion with stake­hold­ers soon, he said.

The ex­ist­ing Prop­er­ty Tax Act (2009) will al­so be im­ple­ment­ed "with a view to hav­ing a fair and eq­ui­table prop­er­ty tax regime in place by Jan­u­ary 1, 2016, us­ing old lev­els and rates as a start­ing point."

Spe­cial pro­vi­sions will be put in place to en­sure the el­der­ly and in­di­gent with fixed low in­comes are not dis­ad­van­taged wher­ev­er they may re­side, he said. Im­bert added that the PP's re­moval of the tax had cost $1 bil­lion. To ob­tain its fair share of tax­es from the gam­ing sec­tor, Gov­ern­ment will al­so ex­pe­dite gam­ing leg­is­la­tion and im­ple­ment a gam­ing reg­u­la­to­ry sys­tem next year.

The PNM's planned Rev­enue Au­thor­i­ty will al­so be re-start­ed and should be in place by next Sep­tem­ber, he said.

Im­bert added that he would in­tro­duce Na­tion­al In­sur­ance Sys­tem leg­is­la­tion to in­crease all earn­ings class lim­its by 13.5 per cent, with the max­i­mum in­sur­able earn­ings class lim­it in­creas­ing from $12,000 to $13,600. He said NIS con­tri­bu­tion rates will al­so be in­creased from 12.0 per cent to 13.2 per cent ef­fec­tive Ju­ly 4, 2016.

Man­i­festo promis­es

?In keep­ing with the par­ty's elec­tion promis­es, Im­bert said ef­fec­tive De­cem­ber 1 the cap on joint in­comes re­ceived by re­tirees re­gard­ing NIS and old age pen­sion will be $5,000, giv­ing re­cip­i­ents an ad­di­tion­al $500 month­ly.

From Jan­u­ary al­so, a re­tirees ben­e­fits pro­gramme be­ing cre­at­ed will pro­vide free dri­vers' per­mits and pass­ports for those 60 and over. Dis­counts on util­i­ty bills for oth­er cat­e­gories of re­tirees will be in­tro­duced lat­er.

While re­duc­ing the 15 per cent VAT rate to $12.5 per cent and in­creas­ing the thresh­old for VAT reg­is­tra­tion from $360,000 to $500,000, from Jan­u­ary Im­bert said he in­tend­ed to broad­en the VAT base by re­view­ing and ad­just­ing ex­emp­tions and ze­ro-rat­ed items (lux­u­ry/non es­sen­tials).

Gov­ern­ment al­so in­creased per­son­al in­come tax ex­emp­tion lim­its from $60,000 to $72,000. Ef­fec­tive Jan­u­ary 2016, this ex­empts from tax all tax­pay­ers earn­ing $6,000 month­ly and less.

Say­ing the for­eign ex­change sit­u­a­tion is un­ten­able, Im­bert said the Cen­tral Bank would be told to re-es­tab­lish the Forex dis­tri­b­u­tion which ex­ist­ed pri­or to 2014. The bank will al­so be asked to clear the back­log of ar­rears of Forex de­mand, en­sure le­git­i­mate de­mands are met and en­sure the sta­bil­i­ty of the ex­change rate.

He as­sured Gov­ern­ment would make its best ef­forts to bring the Cli­co mat­ter to an am­i­ca­ble con­clu­sion.

Gov­ern­ment al­so in­tends to give the Ju­di­cia­ry the fi­nan­cial au­ton­o­my it has re­quest­ed, in­clud­ing to man­age its re­sources, pro­cure­ment and con­struc­tion of fa­cil­i­ties. This is pro­ject­ed to be achieved by the end of 2016.

Dis­cus­sions have al­so start­ed with the In­ter De­vel­op­ment Bank on an af­ford­able mass tran­sit sys­tem op­tion. An in­vest­ment de­ci­sion is ex­pect­ed be­fore the end of the fis­cal year.

Im­bert's de­tailed ac­cu­sa­tions of PP eco­nom­ic mis­man­age­ment in­clud­ed that pub­lic ex­pen­di­ture rose 33 per cent over the last five years, from $46.7 bil­lion in 2010 to $62 bil­lion for 2015.

He added: "Notwith­stand­ing bil­lions of dol­lars in bor­row­ings, tax amnesties, ex­tra­or­di­nary div­i­dends, sale of as­sets and high oil and gas prices, our cash bal­ances at the Trea­sury moved from a pos­i­tive $6.5 bil­lion on May 24, 2010, we were in cred­it then, to a neg­a­tive of $8.5 bil­lion in the mid­dle of Sep­tem­ber 2015, a re­ver­sal of $15.0 bil­lion.

"What this means is that we are un­able to use the re­sources of our sur­plus funds, in­clud­ing the Green Fund or the Un­em­ploy­ment Fund, since they are pledged against the over­draft and are un­avail­able for draw­down."

He said the PP had al­so left the PNM with $5 bil­lion to be paid on col­lec­tive agree­ments.

Say­ing T&T needs a pro­gramme of eco­nom­ic ad­just­ment, Im­bert called on the pri­vate sec­tor and labour move­ment to work with Gov­ern­ment on so­lu­tions. He said the econ­o­my's re­cov­ery would de­pend crit­i­cal­ly on the pri­vate sec­tor's re­ac­tion to the im­proved busi­ness en­vi­ron­ment and oth­er mea­sures be­ing in­tro­duced.