PAY TAXES, ERASE DEFICITANDRE BAGOO Friday, September 10 2010
FINANCE Minister Winston Dookeran yesterday issued a call for citizens to pay outstanding tax arrears noting that these payments alone could fund the $7 billion deficit which he outlined in his 2011 Budget.
Describing the Budget he presented on Wednesday as a foundation and “framework” for recovery which contains “bold risks”, the Finance Minister also outlined what he said was the underlying philosophy of the Government’s fiscal plan. That philosophy is based on the idea that citizens will take the fate of the economy into their own hands and respond to the measures he has outlined to boost entrepreneurship.
“The tax arrears in this country on the books amount to about $13 billion. Now that is a very large number,” Dookeran said as he addressed the traditional post-Budget breakfast at the Trinidad and Tobago Chamber of Industry and Commerce, Westmoorings. He noted that of the $13 billion figure, about $7 billion is attributable to active sources capable of payment.
“If, therefore, everyone was to pay their taxes, we would have no deficit in Trinidad and Tobago. And that is the call I wish to make. Let us take that call seriously,” he urged.
As such, Dookeran said tax revenues represent one major area of risk for the Budget as he hopes they will be bolstered by a larger idea of citizens changing their views on State finances.
“The risk that I have taken is based on the presumption that the people will now engage in a new beginning, a new perspective and–in so doing–will be able to change their economic fortunes,” Dookeran said. He noted there is bound to be “scepticism as to whether or not we will make this perspective shift and...whether the people will feel confident enough to do it themselves.”
“That is the risk that I really am now prepared to take,” Dookeran, a former Central Bank Governor, said. “And I do believe that is a risk which I had no alternative but to take. Because given the situation in the country now in the global arena, as well as in terms of our lack of confidence in our system, we must take some bold risks.”
Dookeran said a tax amnesty which he announced on Wednesday for late tax filings is “very important” and could be “a source of revenue”. He noted the Budget also introduces a new covenant which includes a pledge that the Government will not engage in harassment to get arrears paid. At the same time, the Finance Minister firmly threatened “harassment for those who do not wish to pay their taxes” and said more stringent tax collection was in the works.
At a Budget discussion with the press yesterday afternoon at his offices at the Eric Williams Financial Complex, Port-of-Spain, Dookeran said Government will not hesitate to enforce taxes currently on the books. Asked what will happen if people do not comply with the call for payment of arrears, he said, “the strategy will be to enforce the law and the requirements.”
“We will probably have to set up some new enforcement in the Inland Revenue Department. I did not cater to 100 percent returns,” he said.
The comments were in line with a review of the 2011 Budget by accounting firm Ernst and Young which warns of the inevitability of a crackdown on tax payments. “Taxpayers should take note that there may be more drastic enforcement activities in the future,” the group reports in its 44-page report.
The Finance Minister outlined several areas of fiscal risk in the Government’s plans including: the Budget’s pegging on a US$65 oil price and US$2.75 per mmbtu gas price, the global economic outlook, the risks of project execution as well as looming public sector wage negotiations which could inflate expenditures in the long-term.
“We do have a risk with respect to our revenue situation,” he said. “There are two aspects to that risk. One is that some of the assumptions we have made with respect to the price of gas and oil and the external situation and whether there will be a double-digit recession or not.” He said there were “matters that are on the radar screen. But we are hoping to build an insulation.” Dookeran assured that if things did not go according to plan, “we will have to handle that.”
“The other risk which we are facing is whether or not our tax revenue will be sustainable,” he noted. He added, “we cannot start afresh until we clean the slate... There are enormous burdens in terms of the lack of trust in the banking and credit union sector...We hope that we have gone as far as possible in cleaning that slate. There is still a lot to be done because we have to execute the tasks that I have announced and I do not want to underestimate the risks of execution.” As an example of a risk of execution, he cited challenges to setting up a Single Electronic Window (SEW) for business approvals.
Dookeran, the Tunapuna MP, expressed confidence that whatever risks lie ahead will be overcome with public support.
“I feel confident that since the perspective of the country is moving from ‘what I can get’ to ‘what I can be’ this risk is less than we might expect,” he said. “We have created the environment so that the people...will now have the condition ‘to be’ rather than ‘to get’.” He described his plans to have the Agriculture Development Bank shun commercial lending rates (six to eight percent) in favour of low rates (three to five percent) as “bold”.
Dookeran said while the Government is calling on citizens to pay arrears and taxes, the payment of State debt to private firms will not be dealt with as rigidly. (There have been calls from business, including the construction industry, for the State to pay its debts faster.)
“I want to return to the day when Government debt was good as gold, but before we get there we have to deal with the situation as it stands now,” Dookeran said. Noting the debt is around $7.5 billion (including VAT refunds due and debts to contractors), the minister warned these debts will not be dealt with overnight.
Dookeran noted the People’s Partnership coalition produced the Budget in three months.
“What we have produced here is three months of work. Or, more particularly, one month of work because the first two months we were just trying to see what the terrain was about and therefore it was a major task ahead of us,” he said. He defended his decision to not cut portions of the social security net to reduce the deficit.
“We did not want to trade-off the current benefits the people have in the interest of the future that we are trying to chart,” he said. “It is about the choices. The choices between the present and the future; those who are well off and those who are not. You cannot escape that.”
“We do believe that we must go back to a balanced Budget. But we do believe that will take some time,” he said.
