There has been some turn­around in the en­er­gy sec­tor but this has not fil­tered down to non-en­er­gy sec­tors, says econ­o­mist In­dera Sage­wan.

“The growth in the en­er­gy sec­tor came pri­mar­i­ly be­cause of the in­crease in gas that we’re start­ing to see, so there’s cer­tain­ly some turn around in the en­er­gy sec­tor. When you look at all the oth­er sec­tors there’s no pick-up,” she said in her as­sess­ment of the T&T econ­o­my ahead of the bud­get pre­sen­ta­tion by Fi­nance Min­is­ter Colm Im­bert on Mon­day.

“There­fore one can ar­gue that the min­is­ter’s pro­nounce­ment was a bit pre­ma­ture. We have to look at what has ac­tu­al­ly been done.

“For ex­am­ple, de­mand stim­u­lates sup­ply so the pri­vate sec­tor looks to the po­ten­tial in­crease in spend­ing pow­er and an in­crease in de­mand in or­der to re­spond but we have been in a sit­u­a­tion for the last cou­ple of years where our pur­chas­ing pow­er is con­tin­u­al­ly be­ing erod­ed through tax­a­tion, through re­moval of sub­si­dies, through un­em­ploy­ment and through no means by which wages and salaries can in­crease. That very crit­i­cal vari­able of in­creas­ing de­mand in the do­mes­tic econ­o­my has not been hap­pen­ing,” Sage­wan ex­plained.

On the oth­er hand, she said, there has been no “re­al con­cert­ed ef­fort” at a non-en­er­gy di­ver­si­fi­ca­tion plan and strat­e­gy.

“We have not seen any re­al ef­fort and any re­al re­sources be­ing put in­to agri­cul­ture, agro-pro­cess­ing, mar­itime ser­vices to put us on that path to re­cov­ery, while at the same time we are hav­ing in­creased un­em­ploy­ment and no sign in terms of where the em­ploy­ment op­por­tu­ni­ties are go­ing to come from.

Sage­wan al­so not­ed the hun­dreds of un­em­ployed doc­tors, en­gi­neers, lawyers and man­age­ment grad­u­ates who are un­able to make a pos­i­tive con­tri­bu­tion to the econ­o­my.

She said in the up­com­ing fis­cal pack­age there is lit­tle room for the im­po­si­tion of more tax­es. How­ev­er, this will de­pend on Im­bert’s plan for main­tain­ing ex­pen­di­ture and meet­ing short­falls.

“The on­ly way he can get monies is through tax­a­tion, sale of as­sets or bor­row­ing. I imag­ine we will see more in the area of the sale of as­sets and we will see more in the area of bor­row­ing be­cause even though our bor­row­ing to GDP ra­tio is rel­a­tive­ly high—about 61 per cent—there is still a lit­tle room in there for ma­noeu­vring, so I wouldn’t put it pass that.

“If at all the Gov­ern­ment has the ca­pac­i­ty with­in the laws to tap in­to the Her­itage and Sta­bil­i­sa­tion Fund I imag­ine we will see that hap­pen­ing as well. We are al­so a year and a half away from a gen­er­al elec­tion, so I think the Gov­ern­ment is go­ing to cush­ion the fall­out from Petrotrin in this bud­get. I think to a large ex­tent there might be some sign of us­ing the bud­get in or­der to mit­i­gate that fall­out,” she said.

On the is­sue of fu­el prices, Sage­wan said: “They have just shut­down our re­fin­ery and we will now be im­port­ing gas. How soon this hap­pens is un­cer­tain at this point, un­less Gov­ern­ment is pre­pared to sub­sidise it we will be look­ing at that.

“Al­so, giv­en the trend, the clear state­ment is that we are mov­ing to­wards the re­moval of the sub­sidy. I don’t think Gov­ern­ment is go­ing to be in­clined to be main­tain­ing that sub­sidy. So there’s the im­pact of that on in­fla­tion, on cost of liv­ing and on the is­sue of busi­ness com­pet­i­tive­ness,” she warned.

Cre­ate an en­vi­ron­ment for busi­ness­es to re­al­ly thrive. That is the ap­peal from the pres­i­dent of the T&T Man­u­fac­tur­ers As­so­ci­a­tion (TTMA) Christo­pher Al­cazar.

“I’m re­al­ly hop­ing the Fi­nance Min­is­ter is go­ing to hold his hand on ad­di­tion­al tax­a­tion on the busi­ness com­mu­ni­ty,” he said.

Al­cazar said the TTMA recog­nis­es that the Gov­ern­ment has a deficit to fill which is not an easy task. How­ev­er, with busi­ness­es have been hit with tax­a­tion from pre­vi­ous bud­gets which has been very dif­fi­cult for some to ab­sorb.

“Those ad­di­tion­al tax­es are ob­vi­ous­ly to close that gap in the deficit. The is­sue with that is not a mat­ter of busi­ness­es not want­i­ng to pay their share of tax­es or to par­tic­i­pate it a tax struc­ture, it’s ac­tu­al­ly quite the op­po­site,” he said.

“The is­sue for us is in cer­tain in­dus­tries, for in­stance in agri­cul­ture and where we are—non-en­er­gy man­u­fac­tur­ing—we re­al­ly do as a coun­try have to pay par­tic­u­lar at­ten­tion to cre­at­ing an en­abling en­vi­ron­ment for busi­ness­es to re­al­ly thrive. Not just to be able to sur­vive but to thrive, which is go­ing to dri­ve up ex­ports, em­ploy­ment, pro­duc­tiv­i­ty, com­pet­i­tive­ness. It has a whole lot of knock-off ef­fects,” Al­cazar said.

The prob­lem, he ex­plained, is the “chick­en be­fore the egg or the egg be­fore the chick­en sce­nario.”

Al­cazar urged the Gov­ern­ment to be very care­ful about what bur­dens it places on the busi­ness com­mu­ni­ty since that cre­ates a neg­a­tive en­vi­ron­ment and puts a strain on busi­ness­es, some of which may have no choice but to down­size.

He said: “They will not be able to com­pete on an in­ter­na­tion­al front, which means they will not be able to ex­port and by down­siz­ing op­er­a­tions this means job loss­es. We have to find that del­i­cate bal­ance while try­ing to fill this gap of the deficit in the bud­get.”

With the prop­er­ty tax there must be a struc­ture to en­cour­age busi­ness­es in­to fur­ther man­u­fac­tur­ing, in­vest­ing in plant and in­vest­ing to be­come more com­pet­i­tive to ex­port fur­ther, Al­cazar said.

“I would imag­ine that tax struc­ture will be looked at and maybe ad­just­ed, so we will see ze­ro tax on plant and equip­ment which for us is a very er­ro­neous tax if you want to talk about me try­ing to in­vest in my plant and so forth,” he said.

“That cer­tain­ly is not in­cen­tivis­ing me to do so. And we need to look at the rate in which you want to tax non-en­er­gy man­u­fac­tur­er. Is the rate that we’re charg­ing in­cen­tivis­ing and en­cour­ag­ing, or is it a bur­den?

“For in­stance, when we first spoke about land and build­ing, non-en­er­gy man­u­fac­tur­ing was to be taxed at six per cent, com­mer­cial at five per cent, res­i­den­tial at three per cent and agri­cul­ture at one per cent. What mes­sage are you send­ing to me in non-en­er­gy man­u­fac­tur­ing on land and build­ing? Maybe we will see some ad­just­ments in that con­ver­sa­tion.”

An­oth­er is­sue for lo­cal man­u­fac­tur­ers is the VAT re­fund.

Ac­cord­ing to Al­cazar, man­u­fac­tur­ers are pay­ing more VAT than they are col­lect­ing.

“We al­ways end up in these re­fund po­si­tions. There’s the ma­jor bur­den that we need to re­pay these monies that are be­ing owed. Of cours­es this is work­ing cap­i­tal for our busi­ness­es, it is our cash flows but at the same time what the TTMA re­al­ly wants to see is that the Min­istry of Fi­nance will look at mea­sures to stop the re­funds from de­vel­op­ing and one way of do­ing that is to re­move the Vat at the ports—on the raw ma­te­r­i­al com­ing in,” Al­cazar not­ed.

He said this does not equate to a loss for the Fi­nance Min­istry but sim­ply means that cash flow bur­dens will be al­le­vi­at­ed, cre­at­ing a so­lu­tion.

“We’re still go­ing to have the prob­lem with the out­stand­ing re­funds of to­day and hope­ful­ly we can get pay­back to the busi­ness­es over time but that cer­tain­ly is go­ing to stop it from con­tin­u­ing to es­ca­late and be­com­ing a larg­er is­sue,” he said.

Crime still cre­ates more ex­pens­es for busi­ness own­ers and while that sit­u­a­tion did not oc­cur overnight, the TTMA pres­i­dent said he is not ex­empt­ed from fur­ther costs.

“Crime is cre­at­ing more cost. The tax­a­tion cre­ates more cost, the traf­fic con­ges­tion on the road cre­ate more costs. When we re­move the sub­sidy on gas and fu­el, it’s more costs to busi­ness.

“What do all these costs do? It makes us less com­pet­i­tive on a glob­al scale. We don’t want to have a con­ver­sa­tion where busi­ness­es are be­com­ing less com­pet­i­tive. We want a con­ver­sa­tion where busi­ness­es are be­com­ing more com­pet­i­tive. Iff my cost per unit can comes down this means I can com­pete be­yond Cari­com and in­to the glob­al mar­ket,” Al­cazar said.

T&T Cham­ber pos­i­tive­ly op­ti­mistic

CEO of the T&T Cham­ber of In­dus­try and Com­merce Gabriel Faria said based on the re­cent IMF re­port and the Fi­nance Min­istry’s re­port which cit­ed eco­nom­ic turn­around cou­pled with some in­crease in en­er­gy prices, there is the ex­pec­ta­tion that this year’s bud­get may be con­ducive to eco­nom­ic growth. He said the Cham­ber is al­so hope­ful that the Rev­enue Au­thor­i­ty will soon come on­stream.

“We al­so recog­nise that over the past few years the fo­cus has been on in­creas­ing tax­es on those that are com­pli­ant and we look for­ward to the im­ple­men­ta­tion of the Rev­enue Au­thor­i­ty which will fo­cus on broad­en­ing the tax net,” Faria said.

“The onus on sup­port­ing the econ­o­my will there­fore be spread more even­ly among every­one that gen­er­ates in­come rather than the ones who are vis­i­ble.”

Faria is al­so hop­ing there will not ad­di­tion­al tax­es levied on con­sumers or busi­ness and he urged the Gov­ern­ment to cre­ate an ecosys­tem that is con­ducive for en­tre­pre­neur­ial growth to re­duce the de­pen­den­cy on en­er­gy.