$55B BUDGET
By Andre Bagoo (Newsday).
Tuesday, October 11 2011
FINANCE Minister Winston Dookeran yesterday unveiled a record-breaking $55 billion fiscal plan which offered “carrots” to citizens to encourage trade and tax payments, but at the same time introduced a series of stiff penalties in order to deter habits which drain the Treasury.
In the second People’s Partnership coalition Budget, Dookeran announced a bold series of new initiatives to benefit pensioners, the disabled, low-income home owners, suffering Clico/HCU policyholders and small business owners. Most notably, the minimum national insurance retirement pension will be increased to $3,000.
At the same time, Dookeran introduced a raft of stiff penalties and licence fees in relation to the fuel trade, most notably a $3 million fine for persons caught exporting or attempting to export volumes of fuel in excess of 160,000 litres without authorisation. Tighter regulations targeted students, illegal traders, insouciant companies, delinquent VAT payers and gamblers.
While there were stiffer penalties, there were no new taxes in the Budget. However, the size of the Budget swelled to the unprecedented scale of $54.6 billion in total expenditures (up from last year’s $49 billion projection) but the projected deficit fell to $7.6 billion, down from last year’s projected $7.7 billion. Tobago got an allocation of $2 billion.
Piloting the Appropriation (Financial Year 2012) Bill at a historic first sitting of the House of Representatives at Tower D, Wrightson Road, Port-of-Spain, the Finance Minister took two hours and forty-three minutes to unveil his plan for the coming year, amid concerns over the local and international economic outlook.
On pensions, he said the minimum pension benefit was last year moved to a $3,000 allowance but inequities remained.
“Despite persons insured under the National Insurance System making contributions via monthly deductions from their salaries, the minimum National Insurance retirement benefit remained unchanged from the sum of $2,000,” he told MPs and specially invited guests at the first floor Parliament chamber of Tower D.
“In order to bring equity to the system, the minimum national insurance retirement pension will be increased to $3,000 per month during fiscal year 2012.”
This increase would be part funded, he said, by an increase in the insurable monthly income ceiling from $8,300 to $10,000.
Additionally, a waiver of outstanding NIB payments was announced for all payment of penalties and interest on outstanding contributions. The proposed waiver is to be applicable until June 30, 2012, and is only applicable on amounts owed up to October 10, 2011. Additionally, NIB benefits are to be simplified.
“We intend to eliminate the complicated and time–consuming benefit structure for retirement benefits by moving from a fixed earning class and dollar figure to a percentage of salary,” he said.
“This will be one percent of salary, up to a maximum of $10,000, for each of the insured’s years of contribution. A worker earning $10,000 per month, having contributed for thirty-one years, will simply be entitled to one percent of $10,000 multiplied by the total years of contribution, in this case 31, which will give him a pension of $3,100 per month. This measure will come into effect during fiscal 2012.”
Dookeran said efforts will be made to have 115,000 self-employed persons currently not paying NIB contribution to be incorporated into the scheme.
Disability grants substantially widened with the introduction of grants for single mothers who are the sole care-givers of a special child and where the household income is inadequate to support the family. Furthermore, individuals who are disabled will automatically qualify for food support under the Food Card programme.
All persons with a disability will be able to access free transport on the PTSC system and specially-designed buses designed for the differently-abled will be made available. Also, families with a child who is disabled will automatically receive food support via the TT Food Card. Disabled persons will also be entitled to a $5,000 scholarship under the Rise Up training programme.
Prospective homeowners also came away with something from the 2012 Budget.
“Government has decided through the Trinidad and Tobago Mortgage Finance Company Limited to provide mortgages at reduced interest rates,” the COP Tunapuna MP said. “Mortgage rates which are currently at 6 to 8 percent will be reduced to 5 to 7 percent. This will benefit over 13,000 homeowners and will become effective during 2012. This mechanism will be reviewed annually.”
The home purchase or construction subsidy will now move to up to a maximum of $50,000 per eligible household for homes costing $200,000 in Trinidad and $220,000 in Tobago, the Finance Minister said.
In relation to the State’s plan to deal with Clico/HCU product holders, Dookeran noted that persons accepting bonds of 11 to 20-year terms will be able to cash them in for tradable trust units in a new scheme. Dividend and income earned from the Clico Trust, he said, would be tax- free.
Consumers will also be encouraged to invest their money in organisations covered by deposit insurance with an increase in the coverage provided from $75,000 to $100,000 for deposit holders of commercial banks and non-banks licences under the Financial Institutions Act 2008. At the same time, legislation will be brought to preserve the rights of deposit-holders to sue organisations intervened in by the Central Bank.
Small and medium-sized businesses are also set to get a boost with incentives to encourage trading on a special small and medium enterprises (SME) tier of the stock market. SMEs with capital between $5 million but less than $50 million and listed on the SME market for trading purposes would be allowed a discounted ten percent corporation tax rate for the first five years.
The Government will continue its move to use divestment of State enterprises to fund special purpose enterprises by widening their capital bases. Scheduled for public share offerings are: First Citizens Bank, the Point Lisas Industrial Port Development Corporation Limited (Plipdeco). The Home Mortgage Bank and the Trinidad and Tobago Mortgage Bank are to be merged and an initial public offer made.
The National Infrastructure Bank will also be established to address financing for infrastructural projects.
In terms of VAT, the threshold for VAT qualification was raised from $200,000 to $360,000, effectively $30,000 per month. While the Budget heralded these incentives and benefits, it also served up some measures to tighten the value for money spent by the State.
Students who benefit from free, GATE-funded tertiary education will no longer have carte blanche funding. Instead, they will only be eligible for continued funding if they perform at a certain academic level.
Gaming establishments, too, face a crackdown.
“We recognise that thousands of persons are employed in this industry. In these circumstances, Mr Speaker, Government signals its intention to enforce the provisions of the law relating to Private Members Clubs to ensure that they comply with regulatory standards.” Stiffer Betting Levy Board fines were also announced.
“We therefore propose to increase the penalty for contravention of the licence requirement from $50,000 to $250,000. Further instances, where the licensee of a licensed betting office fails to pay the levy, the fine payable on summary conviction will be increased from $50,000 to $250,000,” he said. Regulations for the industry are to also be brought to Parliament.
VAT penalties are also to be increased, though the Minister did not give specifics.
While the $4 billion fuel subsidy remains in place, businesses in the gas and petroleum sector are to feel the pinch as the State regulates the fuel industry.
The Petroleum Act is to be amended to introduce stiffer penalties including: $3 million for illegal trade of more than 160,000 litres; and penalties of $600,000 to $150,000 for volumes between 160,000 and less than 40,000.
Anybody who violates Section 6(2) of the Petroleum Act (which targets unlicenced operators) will now be fined $300,000 up from $30,000 and $5,000 per day, up from $1,500 per day. For breaking the rules of the regulations set out in the Act the summary conviction fine is now $150,000, up from $15,000, and $3,000 per day, up from $300.
Gas stations are to feel the pinch with higher licence fees for increasing retail operations. For the first time, the fees will be linked to trade volumes with a $1,000 fee for sales of gasoline and diesel of less than 1,000,000 litres, a $2,000 fee for sales less than 5,000,000 litres and $4,000 for stations with sales in excess of that.
The licence for fuel peddling will move from $50 to $1,000, a twenty-fold increase. To transport fuel will now incur a $500 fee. New pipeline fees, ranging from $40,000 to $5,000, will be introduced in relation to natural gas transmission. Fees for CNG operations ranging from $1,000 to $5,000 are to be imposed.
New petroleum licences are to be introduced for petroleum operations, with exploration, production, refining, liquefaction, transportation, marketing and petrochemical operations licences moving from $4,000 to $40,000.
There will be tighter regulations to deal with port security. Containers, Dookeran said, would be subject to tighter regulations.
Companies that are late in filing updated paperwork to the Companies Registry also face a crackdown. The penalty for late filing of documents will be increased to $500 for the period of non- compliance. However, there will be a brief waiver period until June 30, 2012.
