Navigating through the crisis' - EY
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
June 2020
Tax alert
Trinidad and Tobago
'Navigating
through the
crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
The Honourable Minister of Finance presented the 2020
Supplementary Appropriation and Mid-Year Review in the context
of the extra-ordinary circumstances brought about by the Novel
Coronavirus.
In our commentary, we highlight the salient aspects of the
Honourable Minister’s presentation.
'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Mid-Year Review
'Navigating through the Crisis'
The novel coronavirus (COVID-19) has wreaked havoc across the globe and has significantly disrupted economic activity in
an unprecedented fashion. Trinidad and Tobago (T&T), having recorded its first case of COVID-19 on 12 March 2020, was not
immune from the calamitous effects of this virus and the Government moved swiftly to introduce a wide range of measures to
mitigate the contagion risks.
These containment measures which included a Stay at Home Order, the closure of non-essential businesses and schools
and the lock-down of ports of entry (airports and seaports) have adversely affected domestic commercial activity. Similar
actions by other nations sought to curtail global demand for crude oil, natural gas and associated products resulting in the
considerable softening of energy related commodity prices, thereby exacerbating the financial woes of T&T.
It is against this backdrop that the Minister of Finance in his Mid-Year Review 2019/20 revised the forecast of the fiscal deficit
to $14,533 million. In conjunction with data obtained in the May 2020 Monetary Policy Report issued by the Central Bank of
Trinidad and Tobago (CBTT), the fiscal position for 2019/2020 is summarized as follows (expressed in TT$M):
REVENUE
• Budgeted 12 months to September 2020 $47,748.90
• Actual 6 months to March 2020 $17,477.50
• Revised Forecast 12 months to September 2020 $38,500.00
EXPENDITURE
• Budgeted 12 months to September 2020 $53,036.40
• Actual 6 months to March 2020 $22,864.50
• Revised Forecast 12 months to September 2020 $53,107.00
DEFICIT
• Budgeted 12 months to September 2020 $ 5,287.50
• Actual 6 months to March 2020 $ 5,387.00
• Revised Forecast 12 month to September 2020 $14,533.00
The revised budgeted deficit to September 2020, which increased from 3.15% to 8.8% of GDP, is driven, in the main, by
lower than expected revenue of approximately $9,200 million. While the Minister of Finance went to great lengths to outline
the specifics underpinning each of the fiscal response measures aimed at the poor and vulnerable, business continuity and
preserving employment, no mention was made of the plans and/or initiatives to address the precipitous fall-off of revenue and in
particular, the elephant in the room, the state of the downstream energy sector, including the closure of petrochemical facilities
at Point Lisas and the refinery.
As the Government cautiously relaxes measures and slowly reopens the economy, the Minister of Finance expects a contraction
of 2.4% in 2020 but expects the economy to rebound at the rate of 4.7% in 2021, with inflation remaining stable at sub 1% levels.
2 | June 2020'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Domestic Economic Activity
CBTT data for the period October 2019 to March 2020 shows that compared to the same period in the prior year, Public
Revenue has decreased substantially across all categories as a direct result of lower global energy prices and the economic
disruption caused by the COVID-19 pandemic.
Public Expenditure, which changed to a much lesser degree, focused on combatting the pandemic by providing healthcare
and monetary alleviation to the affected public and business community. Consequently, Government’s Overall Balance which
remains negative, has increased.
Oct 2018 — Mar Oct 2019 — Mar % Variance
2019 2020
Revenue 21,557.00 17,477.50 -18.9%
Current 20,586.60 17,400.10 -15.5%
Energy 5,603.30 3,900.20 -30.4%
Non-Energy 14,983.40 13,499.90 -9.9%
Capital 970.40 77.30 -92.0%
Expenditure 23,408.00 22,864.50 -2.3%
Current 22,165.20 21,428.50 -3.3%
Wages and Salaries 4,500.00 4,657.40 3.5%
Goods and Services 2,364.30 2,369.70 0.2%
Interest Payments 1,836.50 1,896.80 3.3%
Transfers and Subsidies 13,464.50 12,504.60 -7.1%
Capital Expenditure and Net Lending 1,242.80 1,435.90 15.5%
Overall Non-Energy Balance -7,454.20 -9,287.20 24.6%
Overall Balance -1,850.90 -5,387.00 191.0%
Total Financing (net) 1,850.90 5,387.00 191.0%
Net Foreign Financing 719.90 727.20 1.0%
Net Domestic Financing 1,131.00 4,659.80 312.0%
Source: CBTT
June 2020 | 3'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Domestic Economic Activity
Data from the CBTT shows a modest rebound in economic activity in the fourth quarter of 2019 (pre COVID-19) following four
consecutive quarters of negative growth.
Domestic Economic Activity -
Quarterly Index Of Economic Activity (QIEA)
(Year-on-year % Change)
15%
10%
5%
Energy Sector
0% Non-Energy Sector
Total QIEA
-5%
-10%
-15%
QI-17 QII-17 QIII-17 QIV-17 QI-18 QII-18 QIII-18 QIV-18 QI-19 QII-19 QIII-19 QIV-19
Source: CBTT
4 | June 2020'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Macroeconomic Indicators
Net public sector debt Headline inflation (year-on-
increased to $107.26b or year) stood at 0.5% in Feb
65.3% of GDP in 2019, up from 2020, and was 0.4% for the
$99.3b in 2018. This number period Jan to May 2020.
is expected to increase in 2020 Inflation is expected to remain
in order to finance the larger low due to reduced economic
fiscal deficit. activity.
The USD selling rate in May The unemployment rate was
2020 was TT$6.7773, down 4.6% at the end of the third
from TT$6.7791 in December quarter of 2018. This rate is
2019 due to subdued expected to increase in 2020
aggregate demand. due to reduced economic
activity.
At May 2020, the Net Asset
Value of the HSF reached CBTT’s net sales of foreign
US$6b. exchange to the public from
Jan to May 2020 amounted
to US$444.9m, declining by
The decline in Government
40.4% year on year, reflecting
revenue during the period
an overall reduction in demand
of lockdown is expected to
in the economy.
increase the fiscal deficit
for FY20 from the budgeted
$5,287m to $14,533m. Trinidad and Tobago’s foreign
exchange reserves as at
May 2020 stood at US$7b,
representing 8 months of
Import Cover.
June 2020 | 5'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Fiscal Measures
Tax Refunds International Exchange of Financial
Information
As part of its response to the COVID-19 pandemic and with
a view to providing cash to individuals and businesses, The Tax Information Exchange Agreements Act, 2020,
Government accelerated the payment of Income Tax and the Income Tax (Amendment) Act, 2020 and the Mutual
VAT refunds in cash. The Government also began issuing Administrative Assistance in Tax Matters Act, 2020 were
VAT Bonds in settlement of outstanding VAT refunds. In his recently passed in Parliament and assented to by the
Mid-Year Budget Review, the Honourable Minister of Finance President.
highlighted the following: The enactment of this legislation should be viewed in the
• The payment of Income Tax refunds totaling $240 million context of an increasing thrust spearheaded largely by the
to approximately 25,000 individuals. The Honourable Organization for Economic Cooperation and Development
Minister indicated that all outstanding individual Income (OECD) for the worldwide implementation of the exchange of
Tax refunds have now been cleared. financial information. Such sharing of information is intended
to assist governments in combatting tax fraud and evasion.
• The initial payment, in cash, of VAT refunds of $250,000
or less totaling approximately $260 million followed by The said legislation will seek to ensure that Trinidad and
the payment, in cash, of VAT refunds between $250,000 Tobago (T&T) is compliant with the Common Reporting
and $500,000 amounting to a further $200 million. Standard for the Automatic Exchange of Financial Account
Information in Tax Matters as developed by the OECD. This
• The issuing of almost $900 million in VAT Bonds over a
will provide for the sharing of financial information between
period of two weeks.
the Board of Inland Revenue (BIR) in T&T and foreign Tax
• In total, approximately $1.6 billion in Income Tax and Authorities.
VAT refunds had been settled in cash and bonds.
It should be further noted that T&T is one of the few
• Consideration is also being given to the accelerated remaining countries on the European Union’s (EU) list of
payment of Corporation Tax refunds either in cash or non-cooperative tax jurisdictions (blacklist). It is anticipated
bonds. that the enactment of this suite of legislation, as well as
the repeal of the Trinidad and Tobago Free Zones Act with
Corporate Documents Amnesty appropriate grandfathering provisions and its replacement
The Miscellaneous Provisions [2019 Novel Coronavirus with the proposed Special Economic Zones legislation, should
(2019-nCoV)] Act, 2020 provides for a waiver of all penalties result in the removal of T&T from the EU’s blacklist.
in respect of the late filing of corporate documents in the
Companies Registry where such documents are filed prior to
or during the period 27 March 2020 to 31 July 2020.
6 | June 2020'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Fiscal Measures
Revenue Authority Property Tax
The Trinidad and Tobago Revenue Authority Bill, 2019 was In his Budget Statement delivered on 7 October 2019, the
passed in the Senate with the support of the Independent Honourable Minister of Finance indicated that there was a
Senators thereby garnering the requisite three-fifths majority 50% threshold for the creation of the Assessment Roll which
for passage. The Bill has been introduced for debate in the was required for the commencement of residential property
House of Representatives. It is notable, however, that the Bill taxation. He further indicated that it was not feasible to
was not supported by the Opposition in the Senate and such expect that the Assessment Roll for residential properties
support by the Opposition would be necessary in the House would be completed before the year 2020. The assessments
of Representatives in order to achieve the required three- for other categories of property would only commence
fifths majority for passage. after the completion of the Assessment Roll for residential
properties.
Notwithstanding the Honourable Minister’s statements, we
note that there has been no formal waiver of the Property
Tax for the years 2018 and onwards.
No New Taxes/Tariffs
No new taxes/tariffs or fuel increases were announced.
June 2020 | 7'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Government Stimulus Package
ACTION/RESOURCE ELIGIBLE PERSONS & FINANCIAL ASSISTANCE RENDERED
SALARY RELIEF GRANT A person is eligible for the Salary Relief Grant in the sum of $1,500 per month for 3
months if all of the following conditions are met:
1. The person is between the ages of 18 to 65 years.
2. The person is a citizen/permanent resident of Trinidad and Tobago (T&T) during the
period of the grant.
3. The person has suffered involuntary termination, suspension or loss of income
between March 19th to June 30th 2020 as a result of the COVID-19 health crisis.
4. The person has no other source of income.
5. The person is registered under NIS and his/her former/present employer is registered
under NIS.
INCOME SUPPORT GRANT Any citizen/permanent resident of T&T outside the National Insurance System (NIS) who
has suffered involuntary termination, suspension or loss of income between March 19th
to June 30th 2020 would be entitled to $1,500 per month at a maximum of 3 months.
RENT ASSISTANCE GRANT • For persons who are terminated from their job or are now experiencing reduced
salary, a Rental Assistance Grant in the sum of $2,500 per month for a period of 3
months in the first instance, and up to 6 months if needed.
• If rental support is needed beyond the 6 months, the grant will be reduced to $1,500
per month and then an additional reduction to $1,000 per month for any additional
months needed.
• Total period of rental assistance is 12 months.
FOOD SUPPORT GRANT Persons who are already in receipt of a Food Card will be topped up for a period of 3
months and over.
TEMPORARY FOOD SUPPORT Where a family is registered with the School Feeding Programme, the Food Card support
CARDS of $510 per month will be given for a period of 3 months in the first instance.
PUBLIC ASSISTANCE GRANT • P
► ersons who are already in receipt of Public Assistance Grant will receive extended
support for a 3-month period.
• An increase of $150, $300, $450 or $500 per month will be given based on the size
of the family requesting the extended support.
DISABILITY GRANT • P
► ersons who are already in receipt of Disability Grant will receive extended support for
a 3-month period.
• An increase of $150 per month will be given.
INCOME TAX REFUNDS Persons owed income tax refunds in the amount of $20,000 or less would be issued tax
refunds during the period.
8 | June 2020ACTION/RESOURCE ELIGIBLE PERSONS & FINANCIAL ASSISTANCE RENDERED
VAT REFUNDS Businesses owed VAT Refunds up to a maximum refund of $250,000 will be issued such
VAT refunds.
Businesses owed VAT Refunds at a minimum of $250,000 but not more than $500,000
will be issued such VAT refunds.
VAT refunds owed to businesses that surpass $500,000 will be issued transferable,
3-year VAT Bonds bearing interest at a rate of 3.3% per annum.
SPECIAL FOREX WINDOW Established importers of pharmaceuticals, hygienic products, food, Personal Protective Gear
THROUGH EXIM BANK (PPE), etc., are entitled to access US$25M per month for a maximum of three months.
CREDIT UNION GRANT • C
► redit Union members will receive loans bearing interest at a rate of up to 50% of
existing rate (e.g. rates will decrease from 12% to 6%).
• Members are entitled to $5,000 per month for 3 months.
CHURCH GRANT • C
► hurches will receive grants in the amount of $10M per month for 3 months.
• Food supplies to be delivered to persons in their community.
RELIEF OF TAXIS AND MAXIS • Registered maxi taxi owners were allowed one-off grants in the amount of $2,000.
OPERATIONS • 15,000
► registered active taxi owners were allowed one-off grants in the amount of
$750.
TOBAGO GRANTS Tobago Regional Health Authority (TRHA): to aid small businesses that are registered
under the Enterprise Development Programme.
Tobago House of Assembly: to cater for COVID-19 related expenses.
Tobago Hoteliers — Upgrades to the hotel in preparation of post COVID-19 undertakings.
DEFERRALS ON MORTGAGES Suspensions for a period of up to 3 months in the first instance and can extend to 6
months for customers who have mortgages with Home Mortgage Bank and Trinidad and
Tobago Mortgage Finance Company.
DEFERRALS ON MORTGAGES Suspensions for a period of up to 2 months in the first instance and can possibly extend
AND RENTALS for renters with the Housing Development Corporation.
INITIATIVES OF COMMERCIAL Customers of commercial banks eligible to the following:
BANKS • Deferral on loan and mortgage instalments for 3 months
• Waiver of penalty/interest on overdrafts
• Reduced interest rates on credit cards
INITIATIVES OF CENTRAL BANK • R
► eduction of the reserve requirement for commercial banks from 17% to 14%
• Decrease in Repo Rate from 5.0% to 3.5%
DAILY STIPENDS FOR • T
► eaching assistance (Primary) — $400 per day for 23 days and provided to 85 staff
TEACHERS members.
• Teacher 1 — $500 per day for 23 days and provided to 681 staff members.
• Head of Department — $550 per day for 23 days and provided to 33 staff members.
• Senior Teacher — $600 per day for 23 days and provided to 57 staff members.
• Vice Principal — $650 per day for 23 days and provided to 9 staff members.
• Principal — $900 per day for 24 days and provided to 476 staff members.
GRANT FOR SMALL TO MEDIUM For businesses with less than TT$1M in annual revenues, the National Entrepreneurship
SIZE ENTERPRISES WITH LESS Development Company Limited (NEDCO) will be given the authorization to administer a
THAN TT$1M IN ANNUAL grant facility.
REVENUES
SOFT LOAN PROGRAMME • This
► programme specifically targets Small to Medium Enterprises with annual gross
revenues in the amount of TT$1M to TT$20M.
• The
► funds being advanced are to cover salary payments, working capital and purchases
of raw materials.
June 2020 | 9'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
Status of Fiscal Measures Budget Statement 2020
PROPOSED MEASURES IMPLICATIONS STATUS
150% Promotional Allowance extended to first-time
PROMOTIONAL ALLOWANCE Enacted in the Finance Act, 2019
exports to the CARICOM market.
Tax allowances granted to companies will increase
from $3 million to $6 million to sponsor the following:
• ►Arts and culture
• Sporting Activities
• Fashion Industry
• Audio, visual, or video production for the purposes
CREATIVE INDUSTRIES of local education, or local entertainment and Enacted in the Finance Act, 2019
production companies in respect of their own local
productions.
An increase from $2 million to $4 million with respect
to the deduction granted to production companies for
the sponsorship of third-party sporting activities and
artistic work.
Increase in the tax credit from 25% to 100% of the
SOLAR WATER HEATING
incurred cost for the purchase of solar water heating Enacted in the Finance Act, 2019
EQUIPMENT
equipment, up to a maximum of $10,000.
TAXATION OF LIFE I► ntroduction of a new methodology for the taxation of
Enacted in the Finance Act, 2019
INSURANCE BUSINESS life insurance companies.
T
► ax Credit increased from 20% to 25% for energy
INVESTMENT TAX CREDIT Enacted in the Finance Act, 2019
companies.
A
► mendment to the capital allowances regime applicable
CAPITAL ALLOWANCES Enacted in the Finance Act, 2019
to the upstream energy sector.
Restriction on the claim for loss relief of up to 75%
LOSS RELIEF RESTRICTION of taxable profits in respect of companies within the Enacted in the Finance Act, 2019
upstream energy sector. ►
PERSONAL ALLOWANCE AT Increase in the personal allowance granted to travelers
Enacted in the Finance Act, 2019
AIRPORTS from $3,000 to $5,000.
10 | June 2020'Navigating
through the crisis'
Trinidad and Tobago
Mid-Year Budget Review 2020
PROPOSED MEASURES IMPLICATIONS STATUS
Increase in the limit on the amount payable from $5,000
CO-OPERATIVE SOCIETIES to $50,000 to a designated beneficiary upon death of a Enacted in the Finance Act, 2019
member of a Co-operative Society.
Enacted in Legal Notice No. 341
MINIMUM WAGE Increase in the hourly rate to $17.50.
of 2019
Implemented by Ministry of
ON-THE-JOB TRAINING (OJT) Increase of stipend by 10%. Labour and Small Enterprise
Development
Enacted in Miscellaneous
Provisions (Heritage and
Stabilisation Fund, Government
Settlement of outstanding refunds through distribution
VAT BONDS Savings Bonds and Value Added
of VAT bonds.
Tax) Act, 2020 & the Value Added
Tax (Bond-Payment Refund)
Regulations, 2020
AGRICULTURAL SECTOR Establishment of the agricultural sector as tax-exempt. Not implemented
SPECIAL ECONOMIC ZONES Establishment of a SEZ regime to replace existing Free
Not implemented
(SEZ) Zones regime.
June 2020 | 11Tax Services EY Tax Leaders EY | Assurance | Tax | Transactions |
Advisory
Business Tax Services Wade George About EY
Executive Chairman
• Business tax compliance and advisory EY is a global leader in assurance, tax, transaction
+1 868 822 6204
• Tax planning and advisory services. The insights and quality
wade.george@tt.ey.com
• Tax controversy/disputes services we deliver help build trust and confidence
• Tax accounting Gregory Hannays in the capital markets and in economies the world
Director over. We develop outstanding leaders who team to
Accounting Compliance Reporting +1 868 822 5501 deliver on our promises to all of our stakeholders.
• Bookkeeping gregory.hannays@tt.ey.com In so doing, we play a critical role in building
• Financial Statement Close Process support Colin Ramsey a better working world for our people, for our
• Statutory reporting (including compilation) Associate Partner clients and for our communities.
• Payroll +1 868 822 5016 EY refers to the global organization, and may
• Financial advisory support colin.ramsey@tt.ey.com refer to one or more, of the member firms of
Ernst & Young Global Limited, each of which is
Indirect Tax Services Anna Mouttet
a separate legal entity. Ernst & Young Global
Associate Partner
• VAT compliance and advisory Limited, a UK company limited by guarantee,
+1 868 822 5025
• Property tax does not provide services to clients. Information
anna.mouttet@tt.ey.com
• Insurance premium tax about how EY collects and uses personal data
• Hotel accommodation tax Nassim Mohammed and a description of the rights individuals have
• Stamp duty Senior Manager under data protection legislation are available via
• Financial services tax +1 868 822 5022 ey.com/privacy. For more information about our
• Credits and incentives nassim.mohammed@tt.ey.com organization, please visit ey.com.
People Advisory Services Susan Ramsamooj EY Caribbean refers to the Caribbean
Senior Manager organization of member firms of Ernst & Young
• Expatriate tax compliance and advisory
+1 868 822 6223 Caribbean Limited, each of which is a separate
• Global employment tax services
susan.ramsamooj@tt.ey.com legal entity. Ernst & Young Caribbean Limited
• Global business immigration services
does not provide services to clients.
• Personal tax services Gina Chung
Senior Manager © 2020 EYSL.
International Tax Services +1 868 822 5008 All Rights Reserved.
• Cross-border corporate income tax gina.chung@tt.ey.com
advisory Alicia Pereira
• Double tax treaty analysis Senior Manager
• Tax-effective supply chain management +1 868 822 6163
• Withholding tax alicia.pereira@tt.ey.com Caveat
Transaction Tax Services Gale Riley This publication was prepared by Ernst &
• Evaluation of significant tax exposures Manager Young Services Limited. The contents are
• VAT and other indirect assessments +1 868 822 5161 intended as a general guide for the benefit
• International tax gale.riley@tt.ey.com of our clients and associates and are for
• Tax structuring Andy Martin information purposes only.
• Identification of post-transactional tax Manager It is not intended to be relied upon for
reduction options +1 868 822 6197 specific tax and/or business advice and as
andy.martin@tt.ey.com such, users are encouraged to consult with
Marc Roper professional advisors on specific matters
Manager prior to making any decision.
+1 868 822 6214
This publication is distributed with the
marc.roper@tt.ey.com
understanding that Ernst & Young Services
Amanda Shaw Limited or any other member of the Global
Manager Ernst & Young organisation is not responsible
+1 868 822 5195 for the result of any actions taken on
amanda.shaw@tt.ey.com the basis of this publication, nor for any
omissions or errors contained herein.You can also read
