Tax manager at accounting firm Deloitte, Shivanan Deopersad says government must indicate clearly whether the new taxes and increases to existing ones announced in the 2018 budget delivered last Monday by Minister of Finance Colm Imbert, are intended to be permanent or are just temporary, short term measures designed to meet the immediate revenue needs of the country.
Reacting on behalf of the Institute of Chartered Accountants of Trinidad and Tobago (ICATT) to the myriad taxes imposed in the budget in an interview with Newsday on Thursday last, Deopersad said the new taxes announced by Imbert and the increases in existing taxes, including the corporate tax rate are higher than corporate tax rate in member countries of the Organisation for Economic Cooperation and Development (a grouping of large,wealthy, mostly first workd economies).
He said the additional taxes and the increase in the rate of corporation tax run the risk of making T&T a “high tax” country and this will discourage investment which is “high mobile.”
“I think that the increases in taxes given the current economic circumstances were by and large reasonable given the immediate fiscal situation, trying to close the budget deficit as quickly as possible and also some measures appear to be targeted to manage the foreign exchange, particularly the increased taxes on vehicles. So they seem to be tactical in relation to the immediate fiscal situation.”
However, Deopersad said that when the government increases taxes, especially the Corporation Tax which has been increased to 30 per cent with a special rate of 35 per cent for the country’s commercial banks, “it could send a signal to the investor market abroad - the global market - that Trinidad and Tobago is becoming a high tax jurisdiction or a higher tax jurisdiction.”
He said the average tax rate in member countries of the Organisation for Economic Cooperation and Development (OECD) is 25 per cent. He added that within the OECD there are countries whose tax rates are lower or higher than 25 per cent, such as the United States where he said the marginal tax rate is still 38 per cent, but the United Kingdom has a 17 per cent tax rate and countries such as Ireland and Singapore are closer to 12 per cent.
“So therefore when you consider that we are competing with locations around the world we need to be mindful of the tax rates. Everything goes worldwide and that influences investment decisions. So even though we may have had to raise the Corporation Tax rates in Trinidad, perhaps a signal could have been sent that these are intended to be temporary as opposed to not being clear on the issue of whether they would be temporary or not and therefore signal to the international market that eventually the intention is to lower the rate,” he said.