Home' Trinidad and Tobago Guardian : August 22nd 2013 Contents This is version 4.0 because for
the fourth year in a row the
contents will be largely the
same as some basic prescrip-
tions regarding the economy
continue to pass us by.
The first issue has always been the appre-
ciation of the role of free market policies in
the development of our economy. As a society,
we either fail or choose not to recognise the
role that money plays in guiding behaviour.
The evidence is there at every level in soci-
ety.Individually many will tolerate a job they
dislike simply because it allows them to pay
the bills. Almost everyone understands that
there is a difference in behaviour when the
Government or your parents pay for something
and when you graduate to paying for it out of
Money guides behaviour, which is the basis
behind tax incentives. People are given a tax
credit on their mortgage interest in order to
provide an incentive to buy a house. There are
tax incentives on annuities in order to promote
saving for retirement.
It should be clear that economic incentives
are key ingredients in configuring the society
that we want and we should provide the incen-
tives towards the behaviours we want to pro-
mote. But most governments in T&T are dom-
inated by persons from the legal profession,
which mean more laws to control behaviour
than economic incentives to guide behaviours.
Often time we end up with laws that are either
unenforceable or very expensive to enforce.
The result is an illusion that something is being
done, but nothing tangible being accomplished.
Can the 2013/2014 budget be a catalyst for
For tax incentives to work there must be an
efficient tax collecting mechanism. Three years
ago, there was a tax amnesty and, at that time,
we were told that if everyone paid the taxes
due, we would not be running a deficit budget.
Let me suggest for the fourth time some incar-
nation of the infamous Revenue Authority.
The failure to establish the Revenue Authority
was, in my view, due to labour relations issues
as opposed to the validity of the idea itself.
Let us, therefore, deal with the concerns of
labour and get on with the business of improved
In a sluggish economy, tax receipts will be
similarly affected. Ensuring all taxes are collected
goes a long way to rebuilding the revenue base.
For the majority of citizens who were properly
contributing to pay for the goods and services
provided by the State, this represents a fairly
painless exercise. The collection of VAT, the
activities of the self-employed, professionals,
small and micro enterprises and, of course,
corporate T&T should be better policed from
a tax perspective in order to improve the level
The issue of collecting the taxes due to the
State is occupying the developed world and
the financial services sector is addressing laws
from the United States seeking to tighten its
tax compliance. It is time for us in T&T to
have a proper constructive process to ensure
everyone pays their due in order to benefit
from the services they want to consume.
We were promised a review of gaming taxes
last year. It is being promised again this time
for next year, all the while, the opportunity
and social cost of this activity continue to be
borne by the population.
Further, the issue of improved tax collection
is even more important if we are seeking to
develop the capital markets. A big part of the
decision-making process for private companies
listing on the local stock exchange is the ques-
tion of tax accountability.
The second critical issue I hope will be
addressed is improving the flexibility of the
Acknowledging that an economic slowdown
will also lead to a decline in revenues and
recognising there is still a degree of global
uncertainty, it would be prudent to structure
the economy so that expenses can be more
easily cut when circumstances demand and
can be re-engaged, if required, at a more appro-
Note, too, that when there is a decline, there
is also a greater need for subsidies and transfers
to act as a buffer. Moderation is required in
order to "keep the dry powder" if things get
worse. Moderation, with elections pending, is
going to be a challenge.
For the fourth time, permit me to highlight
that hand in hand with a flexible economy is
one that also values transparency. This issue
is always a political hot potato and for good
reason. With every change of government for
the past 20 years, there has come a promise
of greater transparency, which has faded over
time. Today seems to be no different. Let me
suggest that sunlight is the best natural dis-
infectant, so there can be no argument in bring-
ing matters related to the public purse into the
light of day.
We talk about engineering competition
which, in turn, drives innovation, but fail to
acknowledge the reality that private contractors
that bid for government contracts do not con-
stitute competition. As long as this remains
our predominant way of generating business,
this does little for our global competitive rank-
The State is a monopoly and bidding to that
monopoly carries no market mechanism and
has nothing to do with consumer preferences.
In this model, central planners (our Cabinet)
decide what is the best project and hand out
taxpayers funds to the preferred bidder.
Just look at the many projects over the years
and consider whether the preference of con-
sumers is a significant contributor to decision
points regarding the use of state resources.
By now we should be at a stage where every
supplier and contractor of the State and state
corporations should have their details publicly
available, including the value, duration and
terms of the contract. The financial statements
of all such entities should also become a matter
for the public record. Transparency in govern-
ment with taxpayers funds is the best way to
serve the people.
We continue to await the passage of pro-
curement legislation, but this in itself is just
the start and the current administration is
clearly lacking credibility on this issue.
Capital market development
I am raising it for the fourth time in the
hope that the manner in which our capital
flows are directed through the economy can
be reviewed. This needs to be addressed in a
holistic manner in order to ensure that all the
required components needed to adequately
mobilise capital are in place. The right form
of capital needs to be accessible to the right
issuer at the right time and at the right price.
Also included here is the question of bank
lending practices and the state of the local
stock market and the issue of foreign direct
Some attention was paid to these in the past
but, in my view, the approach was not holistic
enough to generate the desired outcomes. While
certain infrastructure---trading platform for
bonds---was put in place, the actual develop-
ment of the bond market itself remains limited.
It is important to realise the entire issue of
small business development, right up to pro-
viding a more dynamic stock market, speaks
to the manner in which capital flows are directed
through the economy. Capital flows, our tax
system and transparency are all inextricably
Often times you hear that companies are
unwilling to access the capital market because
of the disclosure requirements and because of
potential tax exposures. A better functioning
tax collecting system, along with greater trans-
parency, takes away this issue. As a company,
becomes indifferent to the tax and disclosure
implications then access to the capital markets
becomes exactly what it should be: a financing
It is at this point that you have capital being
put to work instead of sitting idle in deposit
accounts. Capital is the life blood of any econ-
omy and our ability to mobilise flows efficiently
means economic diversification will take place
naturally and at pace. The question is: will we
ever get it.
Ian Narine is a broker registered with the
Securities and Exchange Commission
BG18 | COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2013 • WEEK FOUR
Budget wish list 4.0
Transparency in government with taxpayers' funds
is the best way to serve the people.
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