Mr Speaker, let us turn now to the tourism sector.
Mr Speaker, tourism is a significant employment generator, foreign exchange earner, and an important contributor to GDP. The Tourism sector also has the potential to provide incentives for a range of inter-industry linkages, involving agriculture, manufacturing and services.
Mr Speaker, in 2005 Trinidad and Tobago received 460,195 stopover visitors and 67,196 cruise visitors. In the case of stopover visitors, which generate more than 95 per cent of all tourist spending, this number was 4 percent higher than in 2004. In the case of cruise visitors, the total figure was some 24 per cent higher than in 2004.
However, Mr Speaker, the situation in Tobago is not reflective of the national picture. Tobago experienced a substantial drop in tourist traffic from Europe in early 2006. This was due to a combination of circumstances and will need aggressive and well planned marketing efforts as well as new airlifts arrangements to correct these negative trends. The Government will work with the Tobago House of Assembly in this regard.
Mr Speaker, the lack of high quality rooms in Port of Spain is currently constraining the ability of the industry to expand visitor arrival numbers. This should be addressed somewhat once the Hilton Hotel and Conference Centre completes its refurbishment programme; the 428 room Hyatt Regency Hotel opens in September 2007; and the 80 rooms Holiday Inn Express at Trincity is completed.
Mr Speaker, in order to facilitate increased hotel investment interest in our country, the Government earlier this year amended the Tourism Development Act to make it more attractive for investors to develop the new tourism product.
Based on the new incentives in the Act, we expect that over time more international hotel brands will view Trinidad and Tobago as an ideal location for investment.
Mr Speaker, the publicity engendered by our Soca Warriors' successful participation in the World Cup, and the efforts made by the Government to enhance that publicity, have both played an enormous role in increasing awareness of Trinidad and Tobago worldwide. Next year's Cricket World Cup also offers an excellent opportunity to further increase this awareness.
Mr Speaker, how can we take advantage of these opportunities?
Firstly, we are taking immediate steps to upgrade our beach facilities at Maracas, Las Cuevas, Vessigny, and Manzanilla.
This will involve a substantial improvement in the quality of the facilities at the beach to world class standards.
To this end, the Tourism Development Company will receive funding from the Infrastructure Development Fund to be utilised specifically for the development of the infrastructure and aesthetics of these and other major sites and attractions in Trinidad and Tobago.
Secondly, Mr Speaker, the recent trade and investment mission to Europe which uniquely combined investment promotion and culture has opened many exciting opportunities for investment in Trinidad and Tobago.
Mr Speaker, domestic tourism offers great potential for hotels and guest houses in both Trinidad and Tobago to generate incremental business, particularly at weekends, and to keep valuable foreign exchange within the country.
However, the success of the domestic tourism campaigns will depend heavily upon increased ease of transportation between Trinidad and Tobago and it is the Government's intention to improve the quality of service between the islands particularly by purchasing two fast ferries, introducing online booking capability for the fast ferry service and by enhancing air service.
RECOGNISING OUR SENIOR CITIZENS AND CARING FOR THOSE IN NEED
Mr Speaker, the Government is committed to nurturing a caring society, that is, a society in which all our citizens, particularly the most vulnerable are cared for and treated with dignity and respect.
Mr Speaker, at the core of the Government's social development programme is the empowerment of the disadvantaged groups in our society. However, we have taken a policy decision to rationalise our all our social programmes to maximise their effectiveness.
The objective is to provide an enabling environment to facilitate the continuous improvement in the economic and social well-being of traditionally disadvantaged groups.
MrSpeaker, the Government is fully cognisant of the plight of some of our senior citizens and since we came into office we have introduced a number measures and programmes designed to improve their living conditions. Mr Speaker, today our senior citizens have access to free medical care and drugs; free bus passes; and an old age pension of $1,150 up from $720 dollars in 2001.
We have established two senior citizens centers, one in St James and the other in Maloney. Two additional centers will be open shortly in Chaguanas and Rio Claro.
Mr Speaker, later in this presentation I will outline on behalf of the Government even further measures to alleviate the hardships of our senior citizens.
Abuse of Minors
Mr Speaker, the Government is determined to address the scourge of child abuse in our society and to protect those vulnerable children who are most at risk of facing a myriad of negative outcomes including neglect, exploitation, malnutrition, and even death.
Mr Speaker, we will move decisively to establish the Children's Authority following the requisite amendments to the legislation. The Children's Authority will, in effect, function as the guardian of all the children of Trinidad and Tobago.
The Family Support System
Mr Speaker, the family as the core institution in society has been singled out for special attention by the Government.
Mr Speaker, the National Family Policy will be a blueprint for creating and promoting a family-friendly society and for mainstreaming family issues into wider sectoral policies.
In order to ensure the broadest possible consensus on this most fundamental of issues, the draft policy document will be presented to the public at a series of upcoming public consultations.
The Conditional Cash Transfer Programme
Mr Speaker, in July 2005 Government appointed a Ministerial Sub-Committee to develop recommendations for addressing the issue of rising food prices specifically in relation to the more disadvantaged groups among us.
As a short-term initiative, the Committee recommended a targeted conditional cash transfer programme with the first phase involving a debit card to low income households throughout Trinidad and Tobago.
The debit card was launched in July this year and target vulnerable persons and family in need. The programme is designed to give recipients the ability to purchase basic food items which are included in pre-approved lists of forty basic food items.
Mr Speaker the second phase of the conditional cash transfer programme will involve the distribution of a smart card and this is expected to be implemented early in the new fiscal year. The Smart Card programme marks the dawn of a new era in Social Development assistance, providing for more efficient and flexible administration, and better targeting and tracking of benefits. In the coming fiscal year, the Programme will be fully implemented.
More importantly, Mr Speaker, this Programme is a temporary measure and will be operated in tandem with skills training for the recipients to move off the programme.
The Physically Challenged
Mr Speaker, those who have disabilities in our society are more likely to be poor, particularly when they are excluded from full access to education and employment opportunities. The Government's programme for the physically challenged will be one of social inclusion.
We will embark upon a broad-based Public Awareness Campaign on the National Policy on Persons with Disabilities and will conduct sensitisation workshops for Government Agencies and other key stakeholders. We will also continue to train personal assistants for persons with disabilities and complete the standardisation of sign language.
Mr Speaker, the Government has a wide ranging reform agenda geared to the establishment of a legal and institutional framework for efficient policy implementation. In the coming years the focus of this agenda will center on:
n Legislative approval of the Heritage and Stabilisation Fund; along with the establishment of a Revenue Authority; and a new procurement regime;
n Capital Market development;
n Upgrading the level of national financial literacy; and
n Special Purpose State Enterprises.
Heritage and Stabilisation Fund
Mr Speaker, a Bill to establish a Heritage and Stabilisation Fund was presented to this Honourable House at the beginning of September this year and we have engaged a number of organisations in discussions as we seek to secure parliamentary passage of the Bill early in the new fiscal year.
Mr Speaker, the establishment of the Heritage and Stabilisation Fund, which will replace the Interim Stabilisation Fund, will provide the Government with an effective vehicle to reduce the vulnerability of fiscal operations to changes in international energy prices; and to save some of the revenue from the exploitation of the country's depletable resources for future generations.
Mr Speaker, the mechanism for transfers from the Heritage and Stabilisation Fund will help maintain fiscal discipline by linking the level of Government expenditure to long run, sustainable energy prices.
On this basis, a significant share of the revenue to be derived from the high prices expected to prevail over the next few years will be saved and invested abroad in high yielding financial assets.
The management of the Fund will be entrusted to an independent Board of Governors with the investment operations placed in the hands of reputable external fund managers. The proposed legislation Mr Speaker, places articular emphasis on transparency and accountability and requires that the Minister of Finance report on the operations of the Fund on an annual basis to Parliament.
Mr Speaker, following upon the comprehensive tax reforms introduced in the last fiscal year, we are now in the process of transforming the human resource and administrative regimes of our principal revenue collection agencies—the Board of Inland Revenue and the Customs and Excise Division of the Ministry of Finance.
The assumption of the responsibilities of the Customs and Excise and Inland Revenue Administrations under the aegis of a Central Agency—the Revenue Authority—is an important step in this reform effort.
Mr Speaker, the Revenue Authority, which is expected to become operational by September 2007, would facilitate improved service and a more client centred approach to the tax-paying citizens of Trinidad and Tobago; the cross checking of information; more efficient use of Information Technology and other resources; and improve tax administration.
The establishment of the Revenue Authority will be guided and driven by an Advisory Committee which would have broad representation from the public and private sectors, including the Trinidad and Tobago Chamber of Industry and Commerce; the Trinidad and Tobago Manufacturer's Association; the Institute of Chartered Accountants of Trinidad and Tobago; and the Public Services Association of Trinidad and Tobago. The Government would insist upon the best practices in the establishment of the Authority.
Capital Market Development
Mr Speaker, over the years the Government and the Central Bank have always taken the lead in the development of our capital market infrastructure which currently is the envy of the Caribbean. However, if we are to be a major financial centre, our capital market must continue to evolve in line with international standards.
Since 2005 activity in the stock market has declined and this understandably is a cause of serious concerns for our investor community, as well as for companies listed on the Stock Exchange.
There is no doubt, Mr Speaker, that an important contributing factor to the current downturn in the stock market has been a declining demand by pension funds, which are restricted by present legislation that limits their holdings of equities to 50 per cent of total assets in the statutory fund.
This requirement has been in effect for years and was imposed for prudential purposes since the Regulator has a responsibility to ensure the financial health and solvency of pension funds to meet the pension entitlements of the workers.
The Central Bank is working expeditiously to reform existing legislation governing private pension funds. The reform will reduce dependence on absolute limits on particular asset classes in favour of a more general risk-management approach.
Mr Speaker, the Government is also considering taking more state corporations to the stock exchange.
We are discussing with some of the energy companies the feasibility of repackaging and listing their local operations on the domestic stock market, but our local private sector also has to do its part.
Mr Speaker, this issue brings me to the broader question of the critical need for greater education to help the general public operate in our rapidly evolving environment.
Financial Literacy Programme
Mr Speaker, rapidly changing lifestyles have forced the bulk of the population to open bank accounts, to use ATMs, to own credit and debit cards and generally to participate actively in the formal financial system.
The average consumer is now required to make complex financial decisions such as contracting mortgage and installment loans, choosing from a range of checking accounts and selecting savings instruments.
In too many cases, these decisions are made on the basis of insufficient knowledge and appreciation for the financial implications.
This has been accompanied by a sharp increase in private consumption and rising consumer debt. Personal savings have in fact declined and with life expectancy increasing significantly many workers are ill-prepared for emergencies or retirement.
Mr Speaker, this is not only so in Trinidad and Tobago but is in fact a worldwide problem. Accordingly, Governments in both developed and developing countries are recognising the need to promote financial literacy programmes to educate individuals to make better financial decisions.
Mr Speaker, the Government is of the view that it is now critical that we launch a comprehensive National Financial Literacy programme to help our citizens deal with the basics of everyday financial management.
The Government has asked the Central Bank to spearhead this national programme.
In turn it is expected that the Central Bank will involve the Ministries of Education, Community Development, Culture and Gender Affairs, Legal Affairs, the Financial Sector, NGOs and a host of people's organisations such as the trade unions and credit unions.
Mr Speaker, the Financial Literacy Programme will be formally launched before the end of the year.
Mr Speaker, you will recall that in September 2005, the White Paper on the Reform of the Public Sector Procurement Regime was laid in Parliament.
The recommendations emanating from this Paper, some of which are urrently being implemented, aim at ensuring greater flexibility, open competition and ethical and fair dealings in respect of public sector procurement.
The new Public Sector Procurement Regime will be applicable to all Government Ministries, Statutory Boards, Regional Health Authorities, Regional Corporations, and State Enterprises.
Mr Speaker, we expect the new Procurement Regime to come into effect early in the new fiscal year.
Special Purpose State Enterprises
As Honorable Members are aware, the importance of infrastructure for rapid economic development as well as for ensuring that our citizens are able to conduct their everyday business in facilities of satisfactory standards cannot be overstated.
In our pursuit therefore to modernise the economy of Trinidad and Tobago, the timely implementation of capital projects became an urgent necessity in particular in the areas of education, community development, national infrastructure, road development, sporting infrastructure, tourism and urban development.
For that reason Mr Speaker, we identified a number of existing state enterprises which had the capacity and created others to develop such capacity to improve implementation effectiveness in the execution of Government's capital expenditure. These enterprises—the Special Purpose State Enterprises—have become in a short space of time and with accountable and transparent procedures, efficient and effective mechanisms for advancing the Government's development agenda and ensuring in the process that the new path we are now charting would bring the greatest good and benefits to the citizens of this country and importantly to those in our rural communities.
Mr Speaker, Trinidad and Tobago has the potential to become a leader in innovation that is facilitated by the diversity of our culture. There will be a sustained effort toward the promotion of cultural awareness and the preservation of our cultural heritage.
The focus in the new fiscal year will be on the improvement of the infrastructure for our performing artistes, the preservation, protection and increased awareness of our heritage, and positioning our culture to be a catalyst for national growth and development.
The Government will pursue an active programme to provide high quality, state of the art facilities for our artistes. Construction work will commence shortly on the flagship projects: the National Carnival and Entertainment Centre and the Academies for the Performing Arts in Port-of- Spain and San Fernando.
Mr Speaker, our heritage buildings and sites and the traditional practices of members of our diverse population will also receive attention. Heritage sites across the country will be upgraded and given due recognition.
Mr Speaker, the power of Sport to unite the country and build and transmit positive values and national pride are well established and undeniable. The achievements of our national football team—the Soca Warriors- over the last year attest to this.
Mr Speaker, the Government's policy in sport is consistent with engendering a basic philosophy which involves the participation of the entire population in some area of sporting activity. Traditionally excluded groups including, women, children, the elderly, and the differently-abled will now become active participants in all our sporting programmes.
Mr Speaker, the Sport Company of Trinidad and Tobago, one of our newly established special purpose state enterprises, is spearheading this transformation. The company has mobilised its resources to develop, upgrade, and rehabilitate a number of sporting facilities throughout the country. New facilities are being constructed in Diego Martin, Sangre Grande, Toco, Point Fortin, San Fernando, Arima and Santa Cruz. We will also construct a National Cycling Track, an Aquatic Centre and the National Tennis Centre.
In the next fiscal year we expect that these facilities will be completed substantially and we will continue the upgrade and refurbishment of other community recreational facilities.
Mr Speaker, the Government is of the view that these facilities should be effectively utilised if they are to contribute to the achievement of our efforts at nation building. We will therefore continue to provide grants to qualifying Sporting Organisations and Associations for the development of elite programmes in their respective disciplines. This initiative will address the needs of high performance athletes to train and prepare for international competitions and to maintain high performances at international level. The programme in fiscal 2007 will address a wider number of sporting disciplines.
Mr Speaker, these programmes have proven to be extremely successful as demonstrated by the qualification of the National Netball Team for the World Championships in 2007 and the exceptional achievements of our Volleyball, Cricket, Hockey, Track and Field and Swimming teams to date.
Mr Speaker, permit me now to turn to Tobago.
The people of Tobago will have direct access to budgetary resources in the order of $2.025 billion for the next fiscal year which represents approximately five per cent of the Total Expenditure. This sum can be disaggregated as follows: an allocation of $1,324.4 million to facilitate the recurrent expenditure of the Assembly; $315.7 million for the regular development programme; and a further $384.7 million to be provided for under Heads of Expenditure to recurrent and capital expenditure in Tobago.
Mr Speaker, the Government continues to be impressed by the continuing efforts of the Tobago House of Assembly to transform Tobago and improve the quality of life of Tobagonians. Indeed, over the last five years, the Assembly has made significant strides in ensuring that Tobago moves forward steadfastly.
As evidence of this, virtually all available social and economic indicators point to the fact that there has been a surge in economic activity in Tobago, particularly in the areas of construction and tourism.
Mr Speaker, the unemployment rate in Tobago is presently less than five per cent.
They also point to the fact that the unemployment rate has fallen and the standard of living of the people of Tobago has been improving rapidly.
In addition, crime on the island, a natural fall out of the rapid pace of development, is now very much under control, owing to some innovative steps taken by all levels of Government; and, particularly, the Tobago House of Assembly.
Looking ahead, we are once again encouraged by the forward-looking budget proposals emanating from the Tobago House of Assembly for the next fiscal year, and many of these proposals have their genesis in the Comprehensive Economic Development Plan for Tobago.
Mr Speaker, this year's Budget for Tobago includes provisions for:
n The Special Windward Development Programme;
n The construction of the Shaw Park Regional Recreation Ground and Cultural Complex;
n The construction of the Bacolet Aquatic Complex;
n Development of Cove Industrial Estate;
n Support for the Domestic Airbridge and Seabridge;
n Assistance to Small Properties in the Tourism Industry;
n The HIV/Aids and Substance Abuse Programme;
n Housing projects at Roxborough, Blenheim, Castara, Adventure Estate and Courland;
n The Roxborough Town Expansion; and
n Construction of UTT Tobago Campus;
The Government remains committed to ensuring adequate funding for the Tobago House of Assembly.
We are also very much committed to working with the Assembly to address the burning issues of the Cost of Living differential between Tobago and Trinidad, as well as the escalating real estate prices on the island. I am especially pleased to announce the Government's intention to respond favourable to the Chief Secretary's expressed concerns about foreign ownership of land in Tobago.
In addition, we endorse fully the new thrust of the Assembly to strive for quality in all aspects of life and improve the level of productivity on the island.
Mr Speaker, I now turn to the fiscal measures.
Senior Citizens Grant
Mr Speaker, Honourable Members will recall that effective October 1st 2004, the maximum Old Age Pension was increased from $1,000 per month to $1,150 per month. The Government has reviewed the distribution of the Old Age Pension, to be renamed Senior Citizens Grant, and we now propose the following amendments:
n With effect from October 1, 2006, there will be only one qualifying income ceiling, that is, income not exceeding $2,150 per month;
n Under the current system, a person whose income exceeds $100 per month but does not exceed $1,000 per month receives a "basic pension" of $1,050. It is proposed that, with effect from January 1st 2007, this person will now receive a Senior Citizens' Grant of $1,150 per month, an increase of $100 per month;
n A person whose income is less than $100 per month is currently paid a "monthly pension" of $1,150. This person will continue to receive $1,150 per month as a Senior Citizens' Grant. In addition this person will be also provided with an additional allowance of $100;
n The maximum amount paid as Senior Citizens' Grant will be $1,150 per month;
n A pro-rated payment mechanism will be introduced whereby for every dollar of income over $1,000 per month, the Senior Citizens' Grant payment will be reduced by an equivalent amount.
Mr Speaker previously, a senior citizen who had other income including an NIS benefit of say $1,400 would not benefit from the old age pension payment. With the introduction of this measure this senior citizen will now be eligible for a senior citizens grant of $700.00. In addition Mr Speaker, the senior citizen who previously had income of less than $100 was eligible to receive an old age pension benefit of $1150.
With this new measure, this senior citizen will not only receive a grant of $1150, but would also receive an additional allowance of $100, thereby bringing his total benefit to $1250. Mr. Speaker based on the new system all beneficiaries would be better off and in fact an additional 10,000 senior citizens will benefit from this measure. This measure is estimated to cost $136 million annually.
Retired Public Servants
Mr Speaker, the Government has acknowledged that rising inflation rates have eroded real disposable income in recent years.
To alleviate the hardships incurred as a result, I proposed to implement a minimum pension payable in respect of service under the Government or other public service at $1,150 per month.
The Physically Challenged
Mr Speaker, the Government continues to recognise the invaluable contribution that physically challenged individuals make to our society and the special needs and concerns of these individuals. To help alleviate the circumstances of these individuals we propose to increase the Disability Grant from $800 to $900. This measure will benefit approximately 14,000 individuals and take effect from October 1, 2006.
Small and Micro Enterprises
Mr Speaker, due to an increase in entrepreneurs in non–traditional business enterprises such as light manufacturing and service based industries and an increase in technology based enterprises, we propose to increase the entry level funding of Nedco from $50,000 to $100,000. In additional, individuals who have completed the payments on their first loan will be eligible for a second loan of up to $250,000.
Mr Speaker, with respect to our students studying abroad the Government proposes to increase the tax allowance from $18,000 to $60,000 per household.
This measure requires amendments to the Income Tax Act and would take effect from January 1, 2007.
Mr Speaker, to reduce the cost of broadband service and to make access to the wireless internet cheaper and more widely available nationwide we propose that telecommunications equipments required for roll out of internet and broadband services be exempted from import duties and Vat for an initial period of two years commencing January 1, 2007. This measure will require amendments to the Vat and Customs Acts.
In addition, we propose to exempt from Vat and Customs Duty all computer peripherals including cables, speakers, mouse pads and anti-glare screens. This measure will come into effect from January 1st 2007 and will require amendments to the Vat Act and Customs Act.
Promoting Healthy Lifestyles
Mr Speaker, to emphasise further the Government's commitment to promoting healthy lifestyles, an increase is proposed to the excise duty on tobacco products, the import duty on tobacco products of Common Market origin, and the tobacco tax on extra-regional tobacco products, by 15 per cent respectively. This measure will take place with immediate effect.
Mr Speaker, we also propose to increase the excise duty on locally manufactured rum, beer and other alcoholic products by 15 per cent, while the import duty on rum, beer and other alcoholic products of Common Market origin will be increased by 15 per cent. Import duties on rum, beer and other alcoholic products from extra regional sources will be increased by 30 per cent. This measure will have immediate effect.
Mr Speaker, the emerging trends in casino-type gaming activities are of great concern to the Government, particularly its rapid spread in urban, rural, and semi-rural communities. The Government is totally against the operation of casinos and all casino type establishments.
Global research findings have shown that the gaming industry can destroy the financial security of families, negatively impact marriages, encourage deviant behaviour among children, undermine work ethic, cause increases in crime, including that of money laundering, and give rise to problem gamblers. The Government is strongly against the proliferation of these casino-type establishments in Trinidad and Tobago.
Mr Speaker, Section 11(1) of the Gambling and Betting Act Chapter 11:19 provides specifically that gambling may be conducted in a private house or a private members' club provided that no money or money's worth put down as stakes, paid by way of losses or exchanged for tokens used in playing a game, is disposed of otherwise than by payment to a player as winnings.
As a result, the Government proposes to enforce the law so that Private Members' Clubs must operate within the confines and original intent of the law.
In other words, Mr Speaker Private Members' Clubs cannot engage in gambling activities that involve payments being made to the house. This law will be reviewed and strengthened to give effect to Government's policy in this regard.
We also propose to ban the importation and use of all slot machines. These measures will take place with immediate effect.
Mr Speaker, as far as the online gaming system is concerned, there will be no further expansion in the games offered and the Government is moving to eliminate the entire system.
Mr Speaker, permit me to give a brief analysis of this year's budget.
M. Speaker, the budget for FY2007 provides for total revenue of $35,125.9 million, which is $3,561.8 million lower than estimated revenue collections in FY 2006. The main reasons for the shortfall are the lower oil and gas prices used in the revenue calculations for the new fiscal year.
Energy revenue collections in 2006/2007 are budgeted at $15,239 million or $2,518 million lower than actual collections last year. This year's budget estimates are based on an average oil price of US$ 45 per barrel while the actual average oil price in 2006/2007 was $ 63.30 per barrel.
Non-energy revenues in FY2007 are budgeted at $19,887.4 million, which is $1,044 million lower than actual collections last year. The decrease reflects the completion of further loan repayments from certain State Enterprises and lower property income.
Total expenditure in FY2007 is budgeted at $ 38,054 million, which is $2,206 million less than last year's expenditure. Excluding transfers to the Heritage and Stabilisation Fund ($3,160 million), total expenditure in FY 2006 is $37,100 million. This means that the budget for FY2007 is a mere 2.5 per cent over last year's level.
Mr Speaker, I would like at this time to outline to this Honourable House some important points which are noteworthy;
In terms of the functional classification, 12.5 per cent of the budget will be spent education, a similar percent on social development and poverty alleviation, eight per cent on national security 6.5 per cent on health, six per cent on infrastructure.
With the strong private sector demand for labour, the budget provides for a reduction in allocations to URP and Cepep.
The allocation for agriculture has been increased by almost 25 per cent to $750 million
There are some significant investment programmes in housing, water and electricity that are financed partly through the budget and partly through direct loan financing. Similarly, the Waterfront Complex is being financed by government-guaranteed loans to Udecott.
Transfers to the Heritage and Stabilisation Fund only become applicable whenever the oil price exceeds the notional budget assumption.
Assuming an average price of US$60 per barrel (roughly the current level in FY 2006) the minimum transfer to this is all around us. Tremendous transformation is at work. We are heading to stand even taller among the nations of the world. We are on the HSF, as required by the proposed legislation, will be $1652 million.
Mr Speaker, the budget documents to be provided to Honourable Members at the end of this session will include a number of analytical tables that should help in clarifying the main points of the Budget for this fiscal year.
Mr Speaker, even on the basis of the very conservative notional oil price of US$ 45 per barrel, the budget provides for a small overall surplus of $29 million.
Mr Speaker, since Independence, this country has been striving strenuously for development. We have made good progress; but some say the nation could have done much better. That could be true. In human affairs, there is always the possibility for improvement. But it cannot be denied that, as a country, as a people, we have always been on the move, on the hunt, in search of the path that would free us completely from the state of under-development that was our legacy when we attained nationhood.
Now is our chance for that complete transformation. Now we can remove all obstacles in our way. It is now or never, Mr Speaker. For the first time in our history, all the elements have come together.
We have the vision and we have the ideas; we have the resources and we have the will; and most importantly, we have the Government that can do it.
Now Trinidad and Tobago can make its giant step into the future. This is our chance for unprecedented development. Let us all see the magnificent possibilities that lie before us; and let us together grasp this golden opportunity for the sustainable development of our country and the enduring prosperity of all our people.
This Budget is another important step towards that goal. It will continue the momentum now visible in every area of national life. It will improve Education, Health, National Security and the Physical and Social Infrastructure. It will make Housing accessible to all, provide Training for the Young and Care for the Elderly. It will increase opportunity for creativity, investment and entrepreneurship. It will strengthen this country as a regional powerhouse in the global marketplace. It will make our future more secure and better the lives of all the people. It will move this country onwards.
I therefore call on all citizens to join the movement forward. Be inspired by what this nation will become. Know the part that you must play. Make use of the many opportunities to improve your lives.
Disregard the cynics and doubters. Believe in your nation and in yourselves. This country is clearly on the move. The evident way to becoming a developed nation.
Mr Speaker, I beg to move.
OTHER FISCAL MEASURES
The following measures which would improve the efficiency of the administration and collection of these taxes will come into effect January 1st 2007 and will require amendments to the Income Tax Act Chap 75:01.
In accordance with Government's policy initiatives to make housing more affordable, it is proposed that further concessions should be given to homeowners whose properties are valued at $450,000 or less.
Under the existing law, the stamp duty payable on properties in general, is as follows:
Where the value of the property-
(a) exceeds $1,500 but does not exceed $350,000, the stamp duty payable is two per cent of such value;
(b) exceeds $350,000 but does not exceed $450,000, the stamp duty payable is five per cent of such value;
(c) exceeds $450,000 but does not exceed $550,000, the stamp duty payable is 7 1û2 per cent of such value; and
(d) exceeds $550,000, the stamp duty payable is 10 per cent.
However, where the property is or includes a dwelling house to be used for residential purposes, no stamp duty is payable on the first $350,000 and the owner/purchaser is required to apply to the Board of Inland Revenue for an exemption from such stamp duty.
It is proposed that residential properties valued at $450,000 or less be exempt from stamp duty with effect from January 1st 2007. Further, the rates of duty applicable to residential properties whose value exceed $450,000 should be as follows:
n For every dollar of the first $100,000 in excess of $450,000, the stamp duty will be five per cent;
n For every dollar of the next $100,000, the stamp duty will be 7 1û2 per cent;
n For every dollar thereafter, the stamp duty will be ten per cent.
This measure will require amendments to the First Schedule of the Stamp Duty Act, Chap. 76:01 under the heading "Conveyance or transfer on sale of any Property."
Lump Sum Death Benefit
Section 8(x) of the Income Tax Act exempts from tax lump sum death benefits paid under a pension plan. However, the exemption, as presently worded, does not specify that the pension plan has to be approved by the Board.
It is therefore proposed that section 8(x) of the Act be amended to specify that the pension plan has to be approved by the Board of Inland Revenue.
Numbering of Section 8A
The Finance Act, 2006 introduced a new section 8A of the Income Tax Act. However, there already exists a section 8A of the Act, which was introduced in the Finance Act, 2004.
It is proposed the purported section 8A introduced by the Finance Act, 2006 be renumbered as section 8B.
Human Resource Development Allowance
Section 10B of the Income Tax Act makes provision for a human resource development allowance. A person is allowed to deduct 150 per cent of all expenses incurred in the training and retraining of employees. A similar provision was contained in section 10E of the Corporation Tax Act. However, section 10E of the Corporation Tax Act was deleted in the Finance Act, 2006. By oversight, section 10B of the Income Tax Act was not deleted.
It is proposed recommended that section 10B of the Income Tax Act be deleted.
Wear and Tear Allowances
Section 11(7) of the Income Tax Act provides that wear and tear allowances shall not be granted unless taxes have been paid under the Lands and Buildings Taxes Act and Municipal Corporations Act. Further, the taxes have to be paid in the year of income in which the claim for wear and tear is made. This condition is quite harsh.
A similar requirement had existed in relation to claims for mortgage interest but had been amended so that the claim would be allowed once the taxes had been paid (not necessarily in the particular income year). No similar amendment was ever made to section 11(7).
It is proposed that section 11(7) be amended to delete the requirement that the taxes be paid in the particular year of income and instead require that they be paid for the year of income to which the claim relates.
Wear and Tear Allowances on Buildings
Section 11B(6) of the Income Tax Act prohibits claims for wear and tear on buildings where a person is entitled to benefits under the Fiscal Incentives Act, the Tourism Development Act and the Trinidad and Tobago Free Zones Act. The purpose of this provision is to prevent the double claiming of allowances for the same expenditure. However, section 11B (6) does not include capital expenditure under section 13B of the Act, which provides for the conversion of a house into a guesthouse.
It is proposed that section 11B (6) be amended to include approved capital expenditure under section 13B.
Prohibition of Deduction for Expenditure Incurred in the Production of Tax-Exempt Income There exists, at present, some uncertainty in the law as to whether expenses incurred in the production of tax-exempt income are deductible. This issue has major revenue implications especially in relation to banks and financial institutions.
It is proposed that the law be clarified by inserting a new section 12(l) to prohibit the deduction of expenses incurred in the production of tax-exempt income except where these expenses are expressly allowed under the Act.
Set-Off of Losses
Section 16(3) of the Income Tax Act prohibits the set-off of losses from any trade, business or farming against income from employment or profession. However, losses from other sources of income such as rental income may be set-off against income from employment or profession. The Board has noted that taxpayers have increasingly been utilising losses from sources other than trade, business or farming to reduce their income from employment or profession.
It is proposed that section 16(3) of the Income Tax Act be amended to prohibit the set-off against employment or professional income of losses from any other source of income specified in section 5 of the Act.
Motor Vehicle Benefits
The Finance Act, 2006 introduced section 134(10) of the Act. This section quantified the taxable benefit in the hands of employees where motor vehicles and other equipment are made available to them by their employer. Section 134(10) specifies the benefit as 50 per cent of the wear and tear or rental value of the motor vehicle or equipment. There appears to be some uncertainty as to whether a benefit would accrue to the employee if the employer chooses not to claim wear and tear on the particular motor vehicle or equipment. Further, the provision should refer to "wear and tear allowance" instead of "wear and tear."
It is proposed that section 134(10) be clarified to ensure that a taxable benefit would accrue to an employee notwithstanding the employer chooses not to claim wear and tear on the motor vehicle or equipment. Also "wear and tear" should be amended to read "wear and tear allowance."
To improve clarity it is proposed that the following assets be included in the appropriate pool in the Seventh Schedule of the Act:
(a) Buildings, structures and improvements thereon completed on or after 1st January 1995.
(b) Industrial buildings and structures under the Income Tax (In Aid of Industry) Act acquired prior to 1st January 2006.
Infrastructure Development Fund
The Government reactivated the Infrastructure Development Fund (IDF) in fiscal 2006 as a mechanism to facilitate the acceleration and provide flexibility in the implementation of its capital development programme.
The IDF was established to finance wholly or partially, certain capital projects under the Public Sector Investment Programme (PSIP). It is a mechanism used, in the main, to finance projects being implemented by existing and newly established special-purpose state entities, to execute projects assigned to them by Ministries, the Tobago House of Assembly and other state agencies.
In the 2006 Budget the sum of $2,300,000,000 was appropriated for transfer into the IDF to undertake a programme of capital projects of an equal sum. The Finance (Supplementation and Variation of Appropriation) Act No 11 of 2006 authorised the deposit of an additional sum of $750,000,000 which brought the total sum deposited into the Fund, in fiscal 2006 to $3,050,000,000.
The Fund was augmented by yet a further sum of $2,700,000,000 which was authorised by the Finance (Supplementary Appropriation) Act No 20 dated September 14, 2006, which brought the total sum deposited into the Fund in the 2006 fiscal year to $5,750,000,000.
The projected expenditure from the Fund for the entire fiscal year is estimated at $3,178,795,498.
It is therefore quite clear that the strategy of utilising the Special Purpose State enterprises to speed up infrastructure has started to yield success. This is evident in the fact that the projected expenditure under the Fund for fiscal 2006 is 38 per cent greater than the sum originally budgeted.
Structurally, IDF expenditure in fiscal 2006 covered a wide range of broad categories. Of the total sum expended 22.4 per cent was used to develop economic infrastructure, 55.6 per cent on social infrastructure and 22.0 per cent on infrastructure which will provide multi-sector and other services. Among other things, these resources were used to:
Upgrade and expand the network of agricultural access roads;
Develop residential and agricultural plots for ex-Caroni (1975) Ltd Workers;
Significantly expand the housing stock for low and middle income citizens;
Accelerate the construction of infrastructure for the university of Trinidad and Tobago;
Upgrade and expand sports and cultural facilities throughout Trinidad and Tobago as well as construct community centres;
Improve our road network, address drainage problems and develop public buildings;
Provide infrastructure in local government regions;
Significantly improve street lighting and address needs for sanitary services and water;
Upgrade and construct primary schools, expand and upgrade secondary schools to facilitate deshifting and construct early childhood centres;
Improve infrastructure in communities; and
Improve infrastructure in a broad spectrum of areas in Tobago.
Full details on the areas in which IDF resources were spent in Fiscal 2006 at the project level are included in the Draft Estimates of the Development Programme for 2007.
Fiscal 2007 Infrastructure Development Fund Programme:
In fiscal 2007 the IDF will be used in an even more focused way to finance infrastructure projects being undertaken by special purpose state enterprises. In this regard, the projects that were being executed by ministries, departments and statutory bodies have been returned to the traditional PSIP.
This explains the growth in the PSIP from its projected expenditure level of $2,072.7 million in 2006 to its budgeted level of $3,400.0 million in 2007.
IDF expenditure for fiscal 2007 has been budgeted at $2,692.9 million and will be structured as follows:
33.4 per cent or $898 million on economic infrastructure;
41.5 per cent or $1,118.0 million on social infrastructure;
24.9 per cent or $670.9 million infrastructure to provide multi-sector and other services; and
0.2 per cent or $6.0 million on pre- investment activity.
The IDF resources in fiscal 2007 will be used, among other things, to:
Develop industrial sites and new port facilities for the energy sector;
Continue the construction of houses for low and middle income families;
Expand and improve the road network, address drainage problems; and restore public buildings;
Development of Wallerfield Industrial and Technology Park, and other industrial estates;
Construction of performing arts centres in Port-of-Spain and San Fernando, provision of a national carnival entertainment centre, provision of community centres, and the construction of infrastructure in communities via self help;
Develop the Brian Lara Multi-purpose Sporting Complex, upgrade of 153 Corporation grounds and develop regional and sub-regional grounds;
Continue develop residential and agricultural plots for ex-Caroni (1975) Ltd Workers;
Develop infrastructure in urban and rural communities;
Construction and upgrade of primary and secondary schools, as well as the development of early childhood centres;
Construction of health facilities;
Construct police stations, construct facilities for the Coast Guard and Prison Service; and
Restore the Red House, expand the communication backbone in the public service and refurbish the NBN Building.
Full details on the areas in which IDF resources will be expended Fiscal 2007, at the project level, are included in the Draft Estimates of the Development Programme for 2007.
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