The Finance Minister maintains that the government has no intention of increasing taxes in this country, especially that of the Value Added Tax (VAT).
His statement follows a notice in circulation by the Opposition United National Congress (UNC) purporting to show these impending increases.
The Cabinet Note 1032, dated May 21, presented by the Ministry of Finance, referred to potential changes to the VAT rate, income tax, corporation tax, a business levy, and new tax brackets for high-income individuals and commercial banks.
However, while the Opposition believes the document refers to the Government’s intention to raise the VAT rate and increase other taxes, the Government maintains that is false and has no intention to do so.
Opposition Leader Kamla Persad-Bissessar presented a document on Monday night that she claimed substantiated her claim that the Government is considering increasing taxes, including VAT, to generate revenue.
Holding up what was purported to be Cabinet Note 1032 during her Star Team meeting in Barrackpore, Persad-Bissessar said, “Well, tonight I have the document that supposedly doesn’t exist. I do not engage in fraud or fake documents.”
Yesterday morning, Finance Minister Colm Imbert took to the X social media platform to condemn Persad-Bissessar’s claim in Barrackpore, saying that she lied.
“She says she has proof that the Government intends to increase VAT. However, all she has is calculations showing the effect on revenue of decreasing or increasing taxes,” he said.
Point nine of page five of appendices entitled ‘Ministry of Finance: Fiscal Measures—Revenue Generating and Expenditure Reducing Measures,’ stated that a VAT rate amendment could result in an estimated revenue of $560 million.
“For every one per cent increase in the VAT rate, $560 million VAT revenue is estimated to be earned. For every one per cent decrease in the VAT rate, $560 million in VAT revenue is estimated to be foregone.
“NB: An increase in the VAT rate to 15 per cent can result in additional revenue of $1.4 billion in revenue earned annually once properly administered,” the document stated. In the comments section of the document, a comment referring to a VAT Amendment read, ‘Last amended in the 2016 Budget (reduced from 15 per cent to 12.5 per cent).’
Appendix four of the Cabinet note also referred to possible revenue generation through other initiatives.
Among them:
• ↓A new tax bracket for High-Income Individuals (estimated revenue of $90 million)–Introduce a new tax bracket of 32.5 per cent on high-income individuals whose chargeable income exceeds $2 million per annum.
• ↓New tax brackets for commercial banks (estimated revenue of $86 million)– At present, commercial banks pay a tax rate of 35 per cent on their chargeable profits. It is proposed to introduce a new tax system as follows: a) Chargeable profits up to $500 million-35 per cent b) Chargeable profits in excess of $500 million-37.5 per cent
• ↓Introduction of a tier taxation system Corporation Tax-Petrochemical Companies a) Chargeable profits up to $100 million-35 per cent b) Chargeable profits in excess of $100 million-37.5 per cent
• ↓Corporation tax (an estimated revenue of $216 million)
• ↓A tax amnesty (an estimated revenue of $800 million)
• ↓A business levy (an estimated revenue of $100 million)
• ↓Revised penalties to ensure compliance with the Board of Inland Revenue (an estimated revenue of $20 million)
• ↓A new drug application fee ($21.2 million)–It is proposed to increase the new drug application fee from $750 to $5,000 to harmonise the current fee with the regional market fee.
• ↓Recruit one hundred (100) short-term officers. Conduct a series of compliance exercises to generate immediate tax revenue of $350 million.
There was, however, no confirmation or definitive suggestion in the document that VAT or any of the tax increases would occur.