Gov­ern­ments should con­sid­er the de­fer­ral of in­come tax­es to help their cit­i­zens at this time, the In­ter-Amer­i­can De­vel­op­ment Bank (IDB) has stat­ed.

And if their shoul­ders are big enough, they should even con­sid­er tax re­lief for com­pa­nies, the IDB stat­ed.

These sug­ges­tions were made in the IDB’s 2020 Latin Amer­i­can and Caribbean Macro­eco­nom­ic Re­port which was pub­lished this week.

“The first line of at­tack should be con­tain­ment and mit­i­ga­tion of the coro­n­avirus by re­vamp­ing health ex­pen­di­ture for ef­fec­tive pre­ven­tion, de­tec­tion, treat­ment, and con­tain­ment,” the IDB stat­ed.

“The main chal­lenge is to avoid a health in­fra­struc­ture col­lapse. The time for growth will come lat­er. Giv­en ex­ist­ing bud­get con­straints, stan­dard macro­eco­nom­ic stim­u­lus poli­cies should not be pri­ori­tised, par­tic­u­lar­ly be­cause many of them may not be ef­fec­tive giv­en the na­ture of the coro­n­avirus cri­sis. If at all, in­fra­struc­ture in­vest­ment should be strict­ly tar­get­ed at the health sec­tor,” it stat­ed.

Ear­li­er this week Prime Min­is­ter Dr Kei­th Row­ley vis­it­ed some of the fa­cil­i­ties that have been ear­marked as part of T&T’s na­tion­al re­sponse to COVID-19.

Among the fa­cil­i­ties vis­it­ed by Row­ley were the new Ari­ma Gen­er­al hos­pi­tal, the Na­tion­al Rac­quet Cen­tre in Tacarigua which has been con­vert­ed to a 50-bed step-down fa­cil­i­ty, and the Na­tion­al Acad­e­my for the Per­form­ing Arts which will be used to house med­ical staff.

“These prepa­ra­tions were not by ac­ci­dent. It was by care­ful ad­vanced plan­ning, dri­ven by the pro­fes­sion­al as­sess­ment of our pub­lic health care of­fi­cers who, very ear­ly in Jan­u­ary, ad­vised the gov­ern­ment and our plan­ning be­gan since then,” the Of­fice of the Prime Min­is­ter stat­ed.

The Cou­va Hos­pi­tal and the Cau­ra Hos­pi­tal are al­so al­ready be­ing utilised as a par­al­lel health care sys­tem to deal with COVID-19.

“Ad­di­tion­al­ly, many peo­ple will lose their in­come while un­der lock­down at home. This makes it im­per­a­tive to de­sign sub­sidy pro­grammes that are well tar­get­ed to vul­ner­a­ble groups, par­tic­u­lar­ly the poor and in­for­mal work­ers. Giv­en past ex­pe­ri­ence, it is key that these pro­grams be de­signed as tem­po­rary, with sep­a­rate ac­counts from oth­er struc­tur­al trans­fer pro­grams, in­clud­ing sun­set claus­es. Trans­paren­cy in the ad­min­is­tra­tion of this pol­i­cy is al­so es­sen­tial,” the IDB stat­ed.

Last week the gov­ern­ment in­tro­duced the first phase of the Salary Re­lief Grant which will be ac­ces­si­ble to cit­i­zens who ei­ther lose their jobs or are tem­porar­i­ly out of work be­cause of COVID-19.

That grant is val­ued at $1,500 a month and is ex­pect­ed to last for three months.

The first phase of the grant is avail­able to peo­ple who are reg­is­tered with the Na­tion­al In­sur­ance Board data­base.

The sec­ond phase is ex­pect­ed to tar­get self-em­ployed per­sons and oth­ers who are not reg­is­tered with the NIB.

A start date for the sec­ond phase has so far not been an­nounced.

But while T&T has ticked off the box­es when it comes to these fis­cal mea­sures one as­pect has not been im­ple­ment­ed as yet.

And that is the pos­si­bil­i­ty of tax de­fer­rals.

“Oth­er pos­si­ble mea­sures for gov­ern­ments with big enough shoul­ders in­clude tax re­lief poli­cies for re­gions, peo­ple, and firms more fierce­ly struck by the shock.

“De­fer­ral of labour tax­es and so­cial se­cu­ri­ty con­tri­bu­tions should al­so be con­sid­ered. So­cial se­cu­ri­ty sys­tems that have pro­vid­ed loans to pen­sion­ers could tem­porar­i­ly de­fer pay­ments com­ing due,” the IDB stat­ed.

“In all cas­es, it is key that these mea­sures be im­ple­ment­ed as de­fer­rals rather than per­ma­nent sub­si­dies so as not to jeop­ar­dise fis­cal sus­tain­abil­i­ty.

“These poli­cies should be con­sid­ered as liq­uid­i­ty al­le­vi­a­tion mea­sures, but they should not turn in­to a li­a­bil­i­ty for gov­ern­ments. Mak­ing poli­cies as sus­tain­able as pos­si­ble is key if gov­ern­ments want to have a strong re­cov­ery once the worst part of the coro­n­avirus cri­sis is over. The more sus­tain­able they emerge, the bet­ter their chances of ob­tain­ing fi­nanc­ing for growth lat­er on,” it stat­ed.

Asked about the pos­si­bil­i­ty of tax de­fer­rals two Mon­days ago, Fi­nance Min­is­ter Colm Im­bert said the coun­try would be cut­ting off its nose to spoil its face if this was done since we are in a bad way fi­nan­cial­ly be­cause of the dra­mat­ic col­lapse in oil prices in­ter­na­tion­al­ly cou­pled with re­duced in­come from nat­ur­al gas.

Im­bert said this coun­try is ex­pect­ed to have a short­fall in bud­get­ed rev­enue of around $7 bil­lion this fis­cal year.

“If we were to say yes we will de­fer col­lec­tion of tax­es, we will al­low peo­ple not to pay tax­es then where is the mon­ey com­ing from to pro­duce the Salary Re­lief Grant and all the as­sis­tance to busi­ness­es, so at this time no we can­not de­fer it. It is un­for­tu­nate but that’s just how it is we need every sin­gle cent,” Im­bert said.

For the first quar­ter of this cal­en­der year, the coun­try record­ed a short­fall in rev­enue of $700 mil­lion, Im­bert said.

The rev­enue col­lect­ed this quar­ter from tax­es and cus­toms and ex­cise amount­ed to $3.6 bil­lion, Im­bert said.

The gov­ern­ment orig­i­nal­ly es­ti­mat­ed col­lect­ing $4.3 bil­lion.

In ad­di­tion to this, the gov­ern­ment is now al­so faced with $2 bil­lion in unan­tic­i­pat­ed ex­pen­di­ture as it as­sists cit­i­zens fi­nan­cial­ly af­fect­ed by COVID-19, as well as pay off out­stand­ing bills to help com­pa­nies ac­cess funds dur­ing this dif­fi­cult eco­nom­ic time.

This coun­try’s main busi­ness cham­bers have called on the gov­ern­ment to help them save jobs in T&T by es­tab­lish­ing a tax cred­it on salaries for com­pa­nies that do not make any prof­it over the next three months.

This was just one of five items the cham­bers deemed crit­i­cal in the im­me­di­ate term.

The cham­bers al­so called on the gov­ern­ment to de­fer the pay­ment of cor­po­ra­tion tax and Val­ue Added Tax (VAT) for the next three months.

Latin Amer­i­ca and the Caribbean will see sharp growth re­duc­tions of be­tween -1.8 per cent and -5.5 per cent of GDP in 2020 due to the im­pact of the coro­n­avirus pan­dem­ic, the IDB has es­ti­mat­ed.

The eco­nom­ic dam­age will car­ry in­to 2021 and 2022 un­less gov­ern­ments im­ple­ment well-fo­cused pro­grammes to off­set the im­pacts, ac­cord­ing to the IDB.

“Our re­gion will suf­fer an eco­nom­ic shock of his­toric pro­por­tions,” said IDB Chief Econ­o­mist Er­ic Par­ra­do.

“We need to pre­serve the core of our economies to im­prove the chances of a quick re­bound,” Par­ra­do added. “Pro­vid­ing re­lief to those more vul­ner­a­ble house­holds that have lost their sources of in­come, help­ing and giv­ing in­cen­tives to firms to re­duce liq­ui­da­tions and avoid sep­a­ra­tion of em­ploy­ees, and ex­tend­ing liq­uid­i­ty to banks so they are part of the so­lu­tion, can all work in that di­rec­tion.”

The IDB sug­gest­ed that T&T should brace for a re­ces­sion.

Two weeks ago Fi­nance Min­is­ter Colm Im­bert an­nounced that T&T had been of­fered and ap­plied for as­sis­tance from in­ter­na­tion­al mul­ti­lat­er­al in the amount of US$450 mil­lion, in­clud­ing US$100 mil­lion from the IDB.

He said the IDB will al­so al­low T&T to re­al­lo­cate unutilised re­sources from oth­er loans and this will pro­vide us with US$30 mil­lion of ad­di­tion­al wig­gle room.

“Out­lin­ing an eco­nom­ic and fis­cal re­cov­ery plan for the post-pan­dem­ic pe­ri­od will, there­fore, be an im­por­tant step go­ing for­ward,” it stat­ed.