Home' Trinidad and Tobago Guardian : September 7th 2014 Contents SBG11
budget special 2015
Sunday, September 7, 2014 www.guardian.co.tt Guardian
Do rich Trinis pay enough taxes?
Eighteen months ago, in
an interview with the
Business Guardian in
March 2013, Finance
Minister Larry Howai
raised the possibility that
the Government could
consider the introduction
of a supertax on the wealthy as a means of
equalising T&T s tax system, which sees
high-income taxpayers benefitting about six
times more than the poor from subsidies on
gasoline, electricity and water.
Howai said that there were "conditions
under which one could consider" such a tax,
although he quickly added that he was not
suggesting that the Government would
implement a supertax on the rich.
He then said: "There is no reason why,
from time to time, those things can t be con-
sidered and introduced. For example, in our
case, the rich benefit more from the fuel
subsidy than the poor. And they also benefit
more than the poor from subsidies on elec-
tricity and water.
"On average, the wealthy benefit about
six times more than the poor from subsidies,
according to the numbers I saw. And, there-
fore, it s something that you need to say how
do we equalise it. That kind of tax helps to
offset things like this."
The Minister of Finance said: "I don t want
to suggest that we are doing that (imple-
menting a supertax on the rich), but there
are conditions under which one could con-
sider---which is why the US in the current
situation is considering doing something like
that. There are issues that we need to consider
as far as the entire tax system is concerned."
The minister s flotation of the idea of a
wealth tax was based on his notion that
T&T s high-income individuals are not paying
their fair share of the country s taxes.
Howai s notion---which he has not repeated
in public since the interview in March 2013---
is based on the fact that many high-income,
non-salaried businesspeople and professionals
fly under the radar of T&T s income tax sys-
Such individuals---doctors, lawyers, owners
of small businesses, vendors, fete promoters,
Carnival bandleaders---are supposed to file
tax returns once a quarter. Many don t. And
of those that do, the under-reporting of
income is rampant, according to private fears
expressed by Board of Inland Revenue (BIR)
The proof that tax delinquency in T&T is
a big problem for the revenue authorities is
that when the PP administration agreed to
a tax amnesty for the period September 8
2010 to May 31 2011, it collected an estimated
$1.8 billion in outstanding tax revenue.
There is also a concern among Government
officials that individuals as a whole may not
be contributing their fair share of taxes to
T&T s total revenue pot.
That concern is based on analysis of the
tax contribution of individuals over time.
For example, individuals as a whole paid
$6.10 billion in taxes in the 2013 fiscal year,
according to revised estimates contained in
the budget document Draft Estimates of Rev-
enue for the financial year 2014. That $6.10
billion was 11.83 per cent of the $51.44 billion
in tax revenue, non-tax revenue and capital
receipts collected by the Government in 2013.
Sunday BG research indicates that the total
revenue collected in 2002 amounted to $14.12
billion and of that amount individuals con-
tributed $2.69 billion or 19 per cent of total
revenue, according to the 2005 Review of
But is the current Pay As Your Earn system
of taxation of individuals a fair one?
Since 2006, T&T has enjoyed a modified
flat tax system in which every individual tax-
payer is supposed to pay 25 per cent of every
dollar they earn above $5,000 a month to
The tax system is called modified because,
in its purest sense, a flat tax is defined as
a system with one tax rate, which applies to
everyone, regardless of income---a system in
which there are no tax credits, deductions,
loopholes or tax shelters.
T&T s current tax system is one in which
all income beneath $5,000 a month (or
$60,000 a year) is not taxed and there are
a small number of allowable deductions such
as the payment of home mortgage interest
up to $18,000 a year and contributions to a
recognised annuity or pension plan up to
$30,000 a year.
T&T is one of 42 countries---mostly in
Eastern Europe and Central Asia---that have
flat tax systems, according to a Wikipedia
report on the issue. Most other countries
have what is called a progressive tax system
in which the tax rate increases as the indi-
vidual s income goes up.
In progressive tax countries, higher-income
earners pay the bulk of income tax and lower-
income families either pay no tax or a much
lower rate than those at the top of the income
Does T&T's flat tax mean that
high-income earners don't pay
their fair share of taxes?
In T&T s flat tax system, all individuals
pay a tax rate of 25 per cent of all income
above $5,000 a month.
So a bank teller earning $10,000 a month
pays the same 25 per cent rate of income tax
as the bank CEO who earns $200,000 a
The bank teller has taxable income of
$5,000 (as the first $5,000 is considered to
be personal allowance and is not taxed) and
pays $1,250 in national income tax ($10,000
--- $5,000 = $5,000/25), going home with
after-tax income of $8,750.
The bank CEO has taxable income of
$195,000 a month ($2.34 million a year) and
Continued on Page 13
Prime Minister Kamla
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