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Move subsidy, more $$ for wages

By Sasha Harrinanan Friday, October 5 2012

click on pic to zoom in
Take note: Finance Minister Larry Howai listens to the points of Ansa Mc AL Group COO Gerry Brooks and Allyson West of PricewaterhouseCoopers during a...
Take note: Finance Minister Larry Howai listens to the points of Ansa Mc AL Group COO Gerry Brooks and Allyson West of PricewaterhouseCoopers during a...

Finance Minister Larry Howai says removal of the approximately $4 billion fuel subsidy would allow Government to build schools, hospitals and increase salaries of public servants.

“On an annual basis I can build probably three small hospitals, about 20 schools costing about $30 million each and give a ten percent increase to the public service with one year’s fuel subsidy.”

Howai made the startling revelation about just how much could be done with the fuel subsidy allocation if it was completely removed during the Ministry of Finance and the Economy’s annual Post Budget Forum, Eric Williams Financial Complex, Port-of-Spain on Wednesday evening. Referring to the outcry by some motorists about the negative impact of the 44 percent increase in the price of premium fuel — motorists went from paying $4 per litre on budget day, October 1, to paying $5.75 per litre on October 2, Howai said the population needs to understand exactly what it would be giving up to maintain the current subsidy.

“We need to make sure the population understands this is a conscious decision they would like to make - that they would like to keep the subsidy rather than have these additional goods or services, or alternatively, have a lower level of debt going forward in the future.”

Hence Howai’s declaration to the nation, the forum was broadcast live from 8 pm-10 pm on State-owned Caribbean New Media Group (CNMG), that Government needs to launch an education programme to help it reach “some kind of agreement” with civil society on the way forward in terms of the fuel subsidy.

Plans for a further reduction in the fuel subsidy during fiscal 2013, not limited to premium gasoline, are meant to go hand-in-hand with a transition to the cleaner, ‘greener’ alternative Compressed Natural Gas (CNG). Unfortunately Howai does not expect the private sector to make the switch unless and until Government has “actually removed the fuel subsidies. So...whether the gradual removal is tied to that or some other mechanism is something that still needs to be worked out. But you will definitely be seeing, one way or the other, the removal of the subsidy, which is a key element of me being able to meet my fiscal targets within the time frame that I have identified,” Howai stated.

The removal of VAT on all foods was also raised. President of the Trinidad United Farmers’ Association (TUFA), Shiraz Khan, warned Howai and Minister in the Ministry of Finance, Vasant Bharath, who also attended the forum, that removing VAT on imported items such as pigtail and canned red beans would “defeat the ‘Buy Local’ initiative launched last year by the Ministry of Food Production.”

Khan suggested leaving VAT as-is and investing an equivalent sum to support local vegetable and fruit production — “what drove inflation in 2012 in June/July was vegetables by 42 percent and fruits by 45 percent, which raised (headline) inflation to 12.6 percent.”

In response, Bharath said it was never the intention of Prime Minister Kamla Persad-Bissessar to put additional strain on farmers. He pointed out that many of the imported foods from which VAT is being removed, including a number of canned foods, are not currently grown locally.

“The intention is not to affect the growth, production or sale of any local foods but to allow a certain time frame for the agricultural sector in TT to grow, while at the same time alleviating the (financial) strain on those that are most vulnerable,” Bharath explained.

Agricultural Society president Dhano Sookoo wondered if there was a disconnect between the dietary health needs of citizens and Government’s intentions. “When we zero-rate everything, pancake syrup and so on, we have to consider the health of our citizens. We’ve talked of eating healthy, locally-grown foods,” Sookoo said, “so I hope that was an oversight and it (VAT removal) would be reconsidered.”

Howai acknowledged not all of the foods which are likely to become zero-rated (VAT-free) may be the healthiest option but said all things in moderation.

“It’s a question of the volumes you ingest. If you eat pancakes with syrup from time to time, I don’t think that’s a problem.”

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