GEISHA KOW­LESSAR-ALON­ZO

The re­peal of prop­er­ty tax and the scrap­ping of the The T&T Rev­enue Au­thor­i­ty (TTRA) has prompt­ed ‪Dr Daren Con­rad se­nior lec­tur­er and head, de­part­ment of eco­nom­ics at the Uni­ver­si­ty of the West In­dies, St Au­gus­tine‬ to call on the gov­ern­ment to lay out a com­pre­hen­sive plan to the pub­lic on how it in­tends to run T&T’s fi­nances.

Mean­while, econ­o­mist Dr Vaalmik­ki Ar­joon has ad­vised that in­stead of form­ing the TTRA to be­gin with, the sim­pler and more cost-ef­fec­tive so­lu­tion was to strength­en the ex­ist­ing BIR and cus­toms di­vi­sions and rec­ti­fy their op­er­a­tional flaws.

Mo­ments af­ter 32 mem­bers of her gov­ern­ment were sworn in at Pres­i­dent’s House—and with most of her Cab­i­net seat­ed be­hind her—Prime Min­is­ter Kam­la Per­sad-Bisses­sar an­nounced last Sat­ur­day that her first pri­or­i­ty would be to dis­man­tle TTRA.

New­ly sworn-in Min­is­ter of Fi­nance Dav­en­dranath Tan­coo had al­so con­firmed that no prop­er­ty tax will be in­tro­duced, promis­ing any­one who paid that the fees would be re­fund­ed.

With prop­er­ty tax gone how would the new ad­min­is­tra­tion source rev­enue to fund the op­er­a­tion ?

In an in­ter­view with the Busi­ness Guardian, Con­rad was adamant that it was a “bad move” to get rid of prop­er­ty tax.

“I think we should have had it a long time ago, and I don’t know why we keep play­ing with the is­sue. I thought it was great that it was im­ple­ment­ed...I paid mine with grace, and now I’m even hear­ing that they’re go­ing to be re­im­burs­ing peo­ple who al­ready paid.

“You can’t tell me the Trea­sury is emp­ty on one hand, and then be telling me that you’re not col­lect­ing prop­er­ty tax and you’re go­ing to be re­im­burs­ing peo­ple. So where does that leave us in terms of rev­enue and oth­er things in terms of what the gov­ern­ment is re­spon­si­ble for fi­nan­cial­ly? It makes no sense to me...Where ad­di­tion­al rev­enue is go­ing to come from be­cause I’m not hear­ing of gov­ern­ment un­der­tak­ing any in­vest­ment.

“...You can’t make fi­nan­cial is­sues po­lit­i­cal is­sues and ex­pect to have fi­nan­cial gain at the end. It’s a net fi­nan­cial loss. All for what? Pol­i­tics? At this time, we can’t be play­ing pol­i­tics.We have to be ob­jec­tive about rev­enue gen­er­a­tion,” Con­rad said.

Ar­joon how­ev­er, not­ed that de­spite plan­ning to im­ple­ment the prop­er­ty tax for nine years, the last gov­ern­ment’s im­ple­men­ta­tion was a dis­as­ter caus­ing much anx­i­ety and frus­tra­tion among the pop­u­la­tion, “giv­ing the im­pres­sion that the gov­ern­ment was un­pre­pared and did not know what they were do­ing.”

He said there were sev­er­al er­rors in val­u­a­tions, where sim­i­lar res­i­den­tial prop­er­ties in the same dis­trict re­ceived dif­fer­ent val­u­a­tions, while oth­ers re­ceived sev­er­al val­u­a­tions.

The pre­vi­ous gov­ern­ment pro­ject­ed prop­er­ty tax rev­enue of $150 mil­lion for 2024 and $125 mil­lion for 2025.

“The eas­i­est way to off­set this fore­gone rev­enue is to iden­ti­fy ar­eas of waste or low­er pri­or­i­ty in the bud­get and re­al­lo­cate those funds to crit­i­cal lo­cal gov­ern­ment ser­vices that the prop­er­ty tax was meant to sup­port. For ex­am­ple, they can ra­tio­nalise some of the trans­fers to state en­ter­pris­es, which ef­fec­tive­ly cre­ates more fis­cal space. They can al­so ful­ly im­ple­ment the gam­ing and gam­bling tax. Re­peal­ing the tax al­so means slight­ly high­er dis­pos­able in­come for house­holds, sup­port­ing spend­ing,” Ar­joon sug­gest­ed.

On dis­band­ing the TTRA, Con­rad again de­scribed this move as play­ing pol­i­tics with im­por­tant is­sues.

“Now is not the time for that,” he cau­tioned adding, “We will pay in the long run for that. We will pay dear­ly. So, where is the rev­enue go­ing to come from now? In­creas­ing tax­es? In­creas­ing in­come tax­es? Well, that’s the on­ly thing left,” he said.

He re­it­er­at­ed that gov­ern­ment needs to lay out its long-term plan in terms of rev­enue gen­er­a­tion.

“I’m not hear­ing that. I’m just hear­ing these stop-gap mea­sures in terms of what I’m go­ing to do be­cause it was an elec­tion cam­paign promise...And this is why I feel jilt­ed as a tax­pay­er. All my tax­pay­er’s mon­ey is al­ways go­ing to be wast­ed and squan­dered by the gov­ern­ment af­ter the month.

“...As an econ­o­mist, I can’t tell you what the long-term plan is. I have not heard it. All I’m hear­ing is we’re not go­ing to do prop­er­ty tax but I’m not hear­ing what is go­ing to be done in in­stead...All they need to do is stop and eval­u­ate the im­por­tance of these things and then make a de­ci­sion on them. You can’t just tell me you’re scrap­ping this and you’re scrap­ping that,” Con­rad said.

Ar­joon: TTRA too po­lit­i­cal

Ar­joon ex­plained that by strength­en­ing the ex­ist­ing BIR and cus­toms di­vi­sions and rec­ti­fy­ing their op­er­a­tional flaws, that would have im­proved ef­fi­cien­cy in tax col­lec­tion and broad­ened the tax base by curb­ing tax eva­sion and avoid­ance. That would have de­liv­ered high­er tax rev­enues and closed the $12 bil­lion tax gap with­out rais­ing tax rates.

Plus, he said the TTRA was seen as po­lit­i­cal­ly charged, con­cen­trat­ing too much pow­er over tax en­force­ment in a sin­gle en­ti­ty with less trans­paren­cy.

“In­deed, the or­gan­i­sa­tion would ul­ti­mate­ly an­swer to a board, di­rec­tor gen­er­al and deputies all ap­point­ed by the min­is­ter of fi­nance – rais­ing con­cerns about po­lit­i­cal in­flu­ence in tax ad­min­is­tra­tion. For in­stance, hir­ing staff would be in­ter­nal to the TTRA, po­ten­tial­ly al­low­ing a gov­ern­ment to place loy­al­ists in key po­si­tions or tar­get cer­tain tax­pay­ers in­di­rect­ly. Em­ploy­ees were asked to give up the job se­cu­ri­ty of the pub­lic ser­vice, and sign on to the TTRA as con­tract em­ploy­ees, which could have hurt their morale and pro­duc­tiv­i­ty. These nat­u­ral­ly af­fect­ed the con­fi­dence and trust in the TTRA,” Ar­joon fur­ther ex­plained.

Go­ing for­ward there are steps that the BIR must take to strength­en and mod­ernise tax ad­min­is­tra­tion, which can in­crease tax col­lec­tion ef­fi­cien­cy, Ar­joon ad­vised, adding that chief among these is in­creas­ing re­cruit­ment and train­ing. He said for many years, BIR has been se­vere­ly un­der­staffed, which height­ened com­pli­ance risks and rev­enue loss­es, as many busi­ness­es re­main un­reg­is­tered or file in­ac­cu­rate and late re­turns.

Ar­joon added that in­suf­fi­cient staff lim­its es­sen­tial field vis­its and ef­fec­tive au­dits, hin­der­ing ef­forts to de­tect tax eva­sion and un­der­re­port­ing.

“Re­cruit­ment and train­ing are lengthy process­es – up to eight months – and the past high staff turnover em­pha­sis­es the ur­gency of im­prov­ing salary and in­cen­tive pack­ages to re­tain trained per­son­nel. Con­tin­u­ous train­ing is equal­ly vi­tal – part­ner­ing with or­gan­i­sa­tions like Caribbean Re­gion­al Tech­ni­cal As­sis­tance Cen­tre (CAR­TAC) or IMF’s fis­cal af­fairs de­part­ment to pro­vide ad­vanced train­ing to BIR staff in trans­fer pric­ing, au­dit­ing of multi­na­tion­al com­pa­nies etc. can im­prove tax col­lec­tions while al­so cul­ti­vat­ing a more skil­ful and mo­ti­vat­ed work­force,” he said.

Ad­di­tion­al­ly, Ar­joon said the tax­pay­er data­bas­es re­quire reg­u­lar up­dat­ing to iden­ti­fy ac­tive and in­ac­tive reg­is­trants, avoid­ing un­nec­es­sary au­dit com­plex­i­ty.

“Au­dits typ­i­cal­ly tar­get larg­er firms, but more re­sources must al­so be al­lo­cat­ed to small­er busi­ness au­dits to ad­dress broad­er com­pli­ance gaps,” he said, not­ing that tax pay­ments should be sim­ple, quick and con­ve­nient – the BIR should ful­ly im­ple­ment an e-fil­ing and e-pay­ment sys­tem via the sin­gle elec­tron­ic win­dow to boost com­pli­ance and prompt tax pay­ments.

This sys­tem, Ar­joon said, could al­so serve as a uni­fied da­ta-ex­change plat­form link­ing the BIR, cus­toms, the reg­is­trar gen­er­al, and the li­cens­ing au­thor­i­ty, al­low­ing for greater tax com­pli­ance – for ex­am­ple, land-reg­istry records of large prop­er­ty sales could au­to­mat­i­cal­ly trig­ger cross-checks against the pur­chas­er’s in­come de­c­la­ra­tions.

Gov’t must have a plan

Econ­o­mist and ad­vo­cate for Caribbean de­vel­op­ment, Dr Ralph Hen­ry be­lieves that if gov­ern­ment did not have a plan, it would not have made such an­nounce­ments in the first place.

“I’m not ful­ly aware of the fi­nances, but if they say they’re go­ing to do that, it means they are clear on how they’re go­ing to raise rev­enue else­where. Gov­ern­ments have to have rev­enue to spend on in­fra­struc­ture and so­cial ser­vices and the like.

“I can’t pro­nounce clear­ly. They must have had their peo­ple look at it and de­cid­ed where else they will find funds...And al­so get­ting rid of that struc­ture (TTRA), they must have a clear po­si­tion in do­ing so, what it would mean, and how at the end of the day they are go­ing to raise mon­ey, raise rev­enue, source rev­enue.

“Gov­ern­ments run on the ba­sis of rev­enue col­lect­ed. So if they’re get­ting rid of one source, they must have some oth­er source from which they will get rev­enue,” Hen­ry said.

BOX

The leg­isla­tive frame­work gov­ern­ing the TTRA was passed by an act of Par­lia­ment in De­cem­ber 2021.

The TTRA was the for­mer PNM ad­min­is­tra­tion’s at­tempt to re­struc­ture the State’s tax col­lec­tion regime and was in­tend­ed to re­place the In­land Rev­enue Di­vi­sion (IRD) and Cus­toms and Ex­cise Di­vi­sion (CED) and it was tout­ed as a ma­jor as­set in gen­er­at­ing funds for the State.

In ad­dress­ing the Par­lia­ment on Feb­ru­ary 24, 2023, then fi­nance min­is­ter Colm Im­bert said, “With an es­ti­mat­ed do­mes­tic tax gap of up to $10 bil­lion, the Gov­ern­ment, through the TTRA, is ac­tive­ly seek­ing to ad­dress this fis­cal vul­ner­a­bil­i­ty and close the tax gap by im­prov­ing the ef­fi­cien­cy and ef­fi­ca­cy of the coun­try’s rev­enue col­lec­tion.”