IMF Calls For Tax Hikes In Trinidad And Tobago
The International Monetary Fund has said Trinidad and Tobago needs to further hike taxes.
The territory has struggled due to low energy prices. Energy revenue accounted for only 27 percent of total government revenue in the 2015 fiscal year, compared to around 55 percent during the preceding decade.
A new IMF report says the country’s current monetary policy is appropriate, and applauds the steps taken to address fiscal imbalances by imposing royalties on natural gas production, eliminating fuel subsidies, and introducing property, excise, and gaming taxes. However, it says further fiscal consolidation is necessary.
It said improvements to tax administration is vital in the area of value-added tax, stating: “The outstanding principal amount of tax arrears is at 11 percent of GDP as of end-March 2017, while the Doing Business survey ranks Trinidad and Tobago 145th in its “paying taxes” index. Delays in the payment of VAT refunds not only impact businesses’ cash flow, but may also affect compliance.”
It recommended that the territory could raise the VAT rate to the regional average of between 15 and 16 percent and widen the VAT base. It also recommended that authorities overhaul how it manages VAT refunds when finances allow.
The IMF welcomed the Government’s engagement with the Inter-American Centre of Tax Administrations on preparing transfer pricing legislation to reduce tax leakages from profit shifting to other jurisdictions.
