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BUSINESS GUARDIAN guardian.co.tt JANUARY 12 • 2017
SHELDON PHILLIPS, J.D.
Citizens of T&T are fond of saying "God is a
Trini" to explain fortune when it smiles upon
our Caribbean republic of just over 1.3 million
From its emergence as the wealthiest nation
in the Caribbean region due to its oil and nat-
ural gas resources to its cultural and sporting prowess such as
the invention of the steel pan and being the smallest country
to ever qualify and compete in the FIFA World Cup, T&T has
an unique and improbable story to tell.
However, based upon a startling new report from Pew Re-
search Centre, God may actually be looking to renounce his
According to the Pew report, 22 per cent or over 330,000 of
the natural-born Trinbagonian population have left T&T to
settle mostly in the United States, Canada or United Kingdom.
While the report doesn't pinpoint which years the migra-
tion occurred or provide significant insight to long-term vs
short-term emigres, the other countries included in the study
should give the country's policymakers reason for concern.
Sharing the list with T&T are:
1. The war-torn; Syria, Macedonia, and Bosnia-Herzegovina,
2. Former Soviet-blocs; Kazakhstan, Albania, and
3. Economically devastated Jamaica and Portugal.
Apart from losing just under a quarter of its population and
suffering the loss of valuable human resources, the most con-
cerning variable highlighted in the Pew Report shows the vast
majority of T&T émigrés are categorised as "highly educated."
In other words, T&T is losing its best and brightest citi-
zens at an alarming rate. As the T&T economy moves into its
third year of an economic recession due to fallen oil prices
and reduced natural gas reserves, implementing models to
engage its diaspora in providing sustainable stimulus to the
economy should be a priority of all private and public sector
stakeholders in the country.
Application of bold, progressive policy making is required
in order to provide non-energy sector-based revenue for the
T&T economy. Failure to meet this most serious challenge may
result in continued economic decline and permanent loss in
human resource capital.
Diaspora-based economic stimulus
Free flow of commerce currently exists between this country
and the countries hosting the majority of T&T expats. However,
it can hardly be claimed that a concerted policy of diaspora
engagement has been the cause of such commerce.
In his 2004 study on development impact caused by Carib-
bean migration, Keith Nurse---senior lecturer at the University
of the West Indies---touched upon the most readily known
but largely inefficient form of diaspora-induced stimulus:
"Remittances are private flows and are not taxed and therefore
do not directly contribute to government revenue. It is therefore
debatable whether remittances and other inflows can compensate
for the investment foregone by governments." Diaspora, Mi-
gration and Development in the Caribbean, Nurse, 2004
Currently, remittances only make 0.5 per cent of the total
T&T GDP. However, the Nurse report indicated those in the
diaspora who make up the highly educated ranks, the very
category defined in the Pew Report as the largest among T&T
migrants, are less inclined to send remittances.
Furthermore, the continuing delay of FATCA (Foreign Ac-
count Tax Compliance Act) legislation implementation in T&T
is jeopardising CBR (corresponding bank relationships) and
may force the use of more expensive remittance services such
as Western Union and MoneyGram.
Another area of diaspora-influenced economic stimulus
covered in the Nurse report is so-called Homegrown Indus-
try Purchases. Culture, sport, and food items are the main
industries represented in this category and the economic
beneficiaries tend to be the direct product and service pro-
viders (food manufacturers, performers, athletes) who take
their product and talents abroad to an expat market eager for
a taste of "home." Certainly not the domestic stimulus T&T
requires but one that nonetheless provides, at the very least,
marketing and promotional value.
So, if remittances and homegrown industry revenues pro-
vide slight economic stimulus, where can policymakers look
to source much needed revenues from the growing diaspora
of foreign-based T&T citizens?
Fortunately, there are strategies that could be applied in order
to, at worst, temper the adverse effects the current migratory
trend has on the T&T economy or, at best, create a model that
will introduce a new category of "tax patriots" as a method
to stimulate economies of countries with small populations
(less than two million) that have lost a significant number of
their populations to emigration.
T&T, using existing tax treaty agreements, can recognise
and realise significant revenue stimulus annually. Through
coordinated negotiation with the US government, T&T citi-
zens residing in the US may be well positioned to pay income
tax revenues to T&T at a lower rate than tax brackets offered
in the US.
Under a key provision of the 1970 Tax Treaty between this
country and the United States, T&T citizens residing in the
US may derive exemption benefits on income earned in the
US-based upon taxes they may pay in T&T:
"Subject to the provisions of the law of the United States
regarding the allowance as a credit against United States tax
of tax payable in a territory outside the United States (which
shall not affect the general principle hereof), the United States
shall allow to a citizen or resident as a credit against its tax-
es, the appropriate amount of T&T tax paid and, in the case
of a United States corporation owning at least 10 per cent of
the voting power of a corporation resident in T&T, shall allow
credit for the appropriate amount of T&T tax paid by the cor-
poration paying such dividend with respect to the profits out
of which such dividend is paid, if the recipient of such dividend
includes in its gross income for the purpose of United States tax
the amount of such T&T tax." ---Article 4, Section 1 United
States-Trinidad and Tobago Income Tax Convention.
Accompanying provisions that enable expats to avoid double
taxation may also provide the taxpayer the ability to apply tax
reduction credits or even exemption from paying US feder-
al taxes based upon income tax payments paid in T&T. For
instance, if a worker who is a T&T citizen residing in the US
earns $70,000 per annum and falls within the US income tax
bracket of 30 per cent, she is not expected to pay income taxes
in both the US and T&T.
Now, let's say the corresponding tax bracket in T&T for the
salary earned by this same US-based T&T citizen is 35 per cent.
Under such a scenario, she may qualify to claim exemption
from paying income tax to US in favour of paying taxes to T&T
at a lower tax rate offered by this country's tax code.
Tax revenues recognised and realised from T&T citizens
living abroad could eclipse revenues from other non-energy
sector industry contributions to the T&T treasury.
Furthermore, the influx of much needed foreign exchange
into this country's treasury would boost investment and further
stabilise the current slide caused by energy sector losses and
lack of a diversified economy.
Now, let's take this approach a step further and borrow
strategies from countries that offer citizenship status for a
fee in what is known as "entrepreneur visas."
Individuals who want to invest in the proposing country's
economy and wishing to gain, first, legal residency status,
followed by citizenship are required to invest upwards to
Imagine T&T adopting a similar model for citizenship ac-
quisition, however, not for entrepreneurial purposes but to
increase the number of eligible taxpayers to contribute toward
the T&T treasury.
A most intriguing revenue-generating model is the issuance
of a bond for T&T citizens residing in the US in lieu of pay-
ing T&T tax described earlier. Such an approach would better
portray revenue raised from US-based Trinbagonians as an
investment in T&T rather than the punitive exercise many
people associate with the payment of taxes.
It is uncertain whether countries like the US would permit
such a liberal interpretation of current tax treaty arrangements.
However, such inquiries should be raised.
In addition, with a political party that fancies itself as a tax
relief-centred entity set to dominate both the executive and
legislative branches from January 2017, it is not unreasonable
to imagine US federal legislators and tax regulators responding
favourably to a plan that:
1. Provides tax relief,
2. Increases take home pay,
3. Reduces foreign aid and need for charitable trade measures,
4. Establishes stronger political ties in a geographically
5. Reduce flow of migration,
6. Increase voluntary repatriation of older residents and
reduce state burden on health care costs.
Devising linkages to the widely dispersed T&T diaspora is a
task best suited for the T&T embassies and consulates.
While engaging members of the diaspora has long been a
challenge, the financial incentive offered through income tax
savings can present unique opportunities for embassies and
consulates to cultivate a substantive relationship with citizens
living abroad and tax professionals who can provide guidance
on how to navigate the US Tax Code and Regulations.
With a concerted effort and shrewd application of existing
conventions and laws, T&T can access financial resources to
improve its infrastructure and institutions for the benefit of its
domestic based population and, hopefully, reduce the factors
pushing its most educated to seek greener pastures outside
the Caribbean region.
In today's increasingly competitive economic climate, it is
clear new ideas are required. Dependence on natural resources
must give way to adopting emerging technologies as well as
looking at placing a new emphasis on filling the growing need
for so-called "blue collar" jobs.
In the end, forums designed to encourage the exchange of
ideas will be key to thinking our way toward economic pros-
perity and strengthening the institutions of the country.
Feel free to share some of your own ideas or comment at
Phillips, an attorney, is the former secretary general of the T&T
Football Association and currently serves as senior consultant
with Washington DC-based Consilium Group Advisers; a
management consulting firm specialising in public sector
management, institutional reform and governance, rule of law
and security, economic development, private sector development
and capital market reforms.
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