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2EY Focus on Trinidad & Tobago Budget 2014 EY Focus on Trinidad & Tobago Budget 2014

Caveat

The Trinidad & Tobago Budget 2014 is based on the Budget statement delivered by the Minister of Finance and the Economy, the Honourable Mr. Larry Howai, in Parliament on 9 September 2013.

before making any decision.

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9 September 2013

Trinidad and Tobago Budget 2014

Table of contentsChairman’s message ................................1

..................................2

Perspectives from the C-suite ..................6

Interest Group insights ...........................10

2014 measures .....................................14

2014 sector review ...............................32

Summary - revenue statistics .................42

...........43

... 44-45

................. 46-47

1EY Focus on Trinidad & Tobago Budget 2014

Chairman’s message

September 2013. This release analyzes the proposed budget measures and also includes commentary from selected leaders in the business community.

Sambrano has been appointed the new leader of our Transactions Advisory Practice. Chris is a very knowledgeable and

In Jamaica, Winston Robinson and Anura Jayatillake aka Jay have joined our Assurance and Transactions Advisory Services practices, respectively, together with several members of their staff. Both of these gentlemen are very well known in the Jamaican market and we take this opportunity to recognize all of our new partners and their staff in this EYC publication.

uniquely structured to provide advice on a Caribbean basis and internationally. Where advantageous to our clients, we leverage

I would invite you to contact our partners in Trinidad & Tobago (T&T) or across our markets in the Caribbean to discuss matters

commitment and dedication to serve our clients in the region.

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EY Caribbean Ltd.


Executive overview“Price is what you pay. Value is what you get.” Warren Buffet

The Honourable Minister of Finance and the Economy, Senator Larry Howai, presented his second budget in Parliament amidst signs of public dissatisfaction with his Government’s performance. On a more

at least on the surface, indicate improving macro-economic prospects for the country. These positive economic trends, coupled with the requirement to relinquish aging Government payables, seemingly

It is unquestionable that the T&T economy has outperformed its non-commodity producing Caribbean

counteract the contraction in demand for their tourism product, the economies of Barbados, the OECS and Jamaica all show signs of continuing distress. Under these circumstances, Jamaica has been forced to

free education.

By comparison, the T&T economy fared far better with the critical differentiator continuing to be the

positive than our Caribbean neighbours. The Honourable Minister reported that the economy recorded

months of import-cover and the country is close to a situation of full employment, due in no small part to the intervention of the Government in the labour market via the CEPEP/URP programs. Indeed, the competition with Government at the low end of the labour market is causing some businesses in the fast

growth of their businesses.

highlighting most of these disconcerting trends, which we discuss further below:

the increase in Government borrowings arising from the bail out of the CLF Group/Clico and

unsustainable in the medium term and actions must be taken by the Government to rein in our


demonstrate the dependence of the country on the Petroleum sector.

Statistically these payments have increased

transfers to statutory bodies).

The country has fallen from 73rd out of 134 countries in 2008 to 92nd out of 148 in 2014: The 2014 ranking was partially adversely impacted by the shift in status of T&T to an “innovative driven economy”

not shown meaningful improvement throughout the period. In 2014 the major impediments to

has set an ambitious target of reducing the country’s ranking to 30th by 2018.

higher and higher Government spending patterns.

that all citizens contribute fairly and equitably. The public can therefore have no real issue with announced

(exclusive ofstatutory bodies)


However, these matters address the revenue side of the equation. Perhaps, cognizant of the population’s

beginning and ending his presentation with a listing of his administration’s achievements.

The matters highlighted included:

- the distribution of 70,000 laptop computers to school children

- the removal of VAT on over 7,000 food items

in a manner that has helped to diversify the economy and create future capacity, growth and jobs?

of shared services centers in T&T by two well respected Canadian banking institutions and the reported creation of 1,000 quality jobs. The other has been the revitalization of the T&T capital markets which initially began with the listing of the Clico Investment Fund and subsequently with the First Citizens IPO. The latter offering especially serves the multiple functions of diversifying the investment options of the

The public offering program and the public private partnerships announced by the Minister are two areas

placing businesses in the hands of the private sector and to raise funding.

Four years into the Peoples’ Partnership Administration and after multiple billions of dollars in actual and

deliver many of the goods and services that the Government has elected to provide, as this of itself could improve the value proposition to the citizens of this country.

Executive overview Cont’d

Wade George

Gregory Hannays


Perspectives from the C-suiteWe are grateful to our valued clients for sharing their insights into the 2014 Budget, which we have outlined hereunder in alphabetical order:

Douglas Camacho Group Executive Director Guardian Holdings Limited

The Budget overall contains a number of items brought forward from prior years which have been repeated

There are a number of items which, in my opinion, are some positives that have been introduced, for the

Processors Limited.

Accident Fund to compensate accident victims sustaining bodily injury where the vehicles are uninsured.

I am also heartened by the proposed laying in Parliament of the new Credit Union Bill and the Occupational

of VAT is welcome news for the private sector.

presentation.

Norman Christie Regional President BP Trinidad & Tobago

competitive and dynamic and it is imperative that this country take measures to remain competitive. The local energy sector has historically been very successful but cannot sit still or else it will not continue to attract the capital required to sustain the industry. It is incumbent on all players to maintain intense focus


development. These incentives have resulted in successful outcomes for the most recent bid rounds and have also resulted in a material increase in upstream activity as evidenced by the number of rigs now operating onshore and offshore (currently 12 versus 1 in 2010). It is good to see a continuation of Government’s focus on improving competitiveness, attracting investments and increasing activity in the sector, all of which are required to continue to progress hydrocarbon resources.

address the other factors that contribute to the country remaining competitive to new and continued investment.

Trinidad & Tobago.

Charles Pashley

Prestige Holdings Limited

In broad terms, the focus on infrastructural development in the budget is correct to foster growth in our

economy which, by the Minister’s own admission, is at full employment is disappointing.

The budget does not seem to address any of the concerns of the Retail Sector as it relates to either the supply of labour or the productivity of labour. There was no mention of releasing into the work force the persons currently employed in the employment relief programs such as C.E.P.E.P. and U.R.P. Both the supply of labour and the productivity of labour is negatively impacted by the social support provided by


Perspectives from the C-suite Cont’dJoel Pemberton

Trinity Exploration & Production, LLC

It is critical to understand the relationship between the energy industry and the wider economy, as

employed by the energy industry. Unfortunately, the relationship in respect to wealth distribution is

economy and cannot be viewed in isolation due to its interconnectivity.

The upstream industry now, more than ever, needs to attract further investment, which requires the risk/reward relationship to be internationally competitive as a majority of funding comes from international sources. Finding the appropriate risk/reward relationship can only be achieved through consistent dialogue with key stakeholders, ensuring that the common objective is to increase reserves and production for the

Without continued capital investment in the upstream sector, the entire energy industry will die because

Norman A. Sabga Chairman & Chief Executive Ansa McAl Group of Companies

to be contained therein as a positive and hope this trend of collaboration continues. We also endorse the approach of the divestment of State assets to the private sector as we believe that the business community

the company to be run in a more business-like manner. Given the state of high employment we urge the Government to withdraw some of its intervention in the labour market in the form of social programs and thereby free up capacity for a private sector in need of such resources.


Gervase Warner President and Group CEO Neal & Massy Holdings Limited

The following are my comments on the Budget 2014 speech delivered by the Honourable Minister of Finance:

1. I was encouraged by the Minister’s succinct and business-like focus.

incurred versus the budget.

3. There are many commendable initiatives which I welcome from the private sector including: support for SMEs, implementing world class procurement processes in the public sector, actioning governance gaps noted by the auditor general, incentives which have stimulated activity in the oil and gas sector and plans for improving revenue collection.

there is a heavy focus on infrastructure spend and far too little focus on building capacity and establishing leadership models in the public sector that will be necessary to drive the desired transformation of the economy.

5. Like the Minister of Energy, I think we should look to diversify from our strengths in the energy sector more with emphasis on further down-stream development, service industries and creating incentives for renewable energy projects and investments.

outcomes. We are building tons of schools and I don’t know where we are going to get the teachers to staff them. We have massive teacher absenteeism and safety problems in schools that seem to be ignored.

7. I think there is a lot of scope and opportunity for the Government to reach out and work more closely with the private sector and other parties to be more effective with its spend and to better engage the private sector in the delivery of services (not just projects).


Interest Group Insights

Trinidad and Tobago Manufacturers’ Association

The Trinidad and Tobago Manufacturers’ Association (TTMA) is encouraged by the measures outlined in

indicated by the Minister of Finance, the non-oil sector is driving the recent growth in the economy and, as such, the establishment of an enabling environment is critical for its continued growth and development.

With respect to the 2014 Budget, the Association wishes to comment on the following:

EXIMBANK

to manufacturers. However, it is concerned with the proposed four year time period in which this is to be

rates.

VAT

refunds due to companies. We also welcome the commitment by the Government to ensure that all VAT

the Government proposes to simplify the VAT refund process for the manufacturing sector and looks forward to the details on these proposals in the debate.

Lands & Buildings Taxes

Public Procurement LegislationThe TTMA is in support of the introduction of the procurement legislation. However, we would like to see the recommendations of the Private Sector/Civil Society Group on Public Procurement Reform incorporated into the Bill prior to being laid in parliament.


SME DevelopmentThe Association supports the initiative announced to develop SMEs through the Fair Share Program. The

Trinidad & Tobago Chamber of Industry & Commerce

The Trinidad & Tobago Chamber of Industry & Commerce is generally pleased that the Minister of Finance

We commend him on listing the achievements and we are happy that he incorporated a report on the progress of government initiatives over the past year; however, the Chamber continues to advocate that Government must measure their performance against their stated list of objectives announced in the last Budget, and give a full account as to the status of the Initiatives.

As we have continuously said, the Chamber believes that crime and theft and corruption continue to be

spent on an annual basis on crime for our small twin-island state. However, we do recognize that crime continues to pose a serious threat to our country, and so with the new allocation of the second largest

more improvement in the area of crime reduction measures, particularly in the area of detection of both

We welcome the news that the Minister has begun the process of identifying State Enterprises which can enter into strategic local or international investment arrangements, thereby encouraging better governance and transparency within these enterprises, as well as lowering their dependencies on government guarantees for funding.

The Minister’s announcement of a review of criteria for Small and Medium Enterprise (SME) listing on the

which the Chamber has been advocating.

We were pleased to hear that the Minister gave his commitment to continued and additional funding for

in the negotiation and formulation of several partial scope agreements with international trading partners.


We are encouraged to hear from the Minister that our airline industry will be operating on a level playing

sector which needs to be opened to encourage tourism, particularly in the sister isle of Tobago. Our Tobago

view to doing our part in the further development and growth of the economy.

Energy Chamber of Trinidad & Tobago

sector more competitive. There has been an ongoing process of dialogue with the Ministries of Energy and

The major principle that we have followed in these discussions is that companies should be rewarded with

into oil and gas production. These measures should help in turning around declining oil production and overcoming the gas supply constraints that have characterized the last few years.

of the gas market and the balance of risk and reward along the value chain.

While we welcome the mention of the importance of the energy services sector, with respect to potential

companies need to start from a strong domestic base.

local ownership.


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The following is our analysis of the proposed measures outlined in the Budget 2014.

Tax Incentives for Petroleum Companies

companies and foster investment, the Minister of Finance and the Economy announced a number of proposed changes as discussed below.

Investment Tax Credit

The proposed measure indicates Government’s acknowledgement of the restrictive nature of this provision and the deterrent

This measure is a direct answer to the calls of the industry and is anticipated to assist in the continuity of investment in qualifying

This proposed measure will take effect from 1 January 2014.

Capital Allowances It is proposed that the capital allowance regime be amended to be more accelerated, as detailed below.

2014 measures


Exploration

the following table.

EXPLORATIONCurrent Proposed

Tangible Assets Intangible Assets

For income years2014 to 2017

Tangible and IntangibleAssets

For income years2018 and thereafter

Tangible and IntangibleAssets

Allowance inyear of

(year one)

Initial Allowance (IA)

Annual Allowance of

Initial Allowance

Annual Allowance of of cost of cost

Allowance in subsequent years

Annual Allowance

years 1-5

Annual Allowance n/aof cost in year two

cost in year three


Development

amended as detailed in the following table.

off in three years, whereby, in comparison with the current regime, the relative acceleration of allowances will also provide a

production.

2014 measures Cont’d

DEVELOPMENTCurrent Proposed

Tangible Assets Intangible Assets Tangible and IntangibleAssets

Allowance inyear of

(year one)


Annual Allowance of

Initial Allowance1

Annual Allowance of


Annual Allowance

years 1-5

Annual Allowance

1 Applicable where a petroleum company attained commercial production by the year the expenditure is incurred. Where commercial production has not been attained, such allowances would be deferred by one year.


Workovers and Qualifying Side-tracks Capital allowances granted in relation to workovers and qualifying side-tracks would be enhanced as detailed in the following table.

incurred prior to income year 2014.

WORKOVERS AND QUALIFYING SIDE-TRACKSCurrent Proposed

Tangible Assets Intangible Assets Tangible and IntangibleAssets

Allowance inyear of

(year one)


Annual Allowance of of cost of cost


Annual Allowance

years 1-5n/a n/a


Capital Allowances on assets transferred between related parties

the transfer of assets between branches and non-resident parent companies which are not at arm’s length.

In this regard, in order to clarify the computation of the wear and tear allowance, this measure proposes to establish the value at which any plant or machinery, new or used, is brought into the branch from a related foreign entity, when it is presumed not to be at arm’s length, to be the lesser of:

1. The fair market value of the asset; or

2. The notional written down value of the asset.

which is owned and used in the trade or business of a person during that year. For the purpose of computing the wear and tear

assets transferred to a branch of a non-resident company operating in T&T. In this regard, the Minister proposes to amend the

Fair Market Value

a related foreign entity not at arm’s length. The fact that fair market value contemplates the price which the asset might

the transaction is conducted at arm’s length.

It is our view that fair market value is the more acceptable basis on which wear and tear allowance ought to be calculated on

and perhaps is consistent with the objective of the provision as initially legislated.

The fair market value approach is also in line with the principles adopted by various developed jurisdictions, including but not

Notional Written Down ValueAs mentioned above, it is proposed that the notional written down value be arrived at by deducting a notional claim of wear and tear allowance against the original cost of the asset from its date of acquisition or construction using the following wear and tear allowance rates prescribed in the Seventh Schedule of the ITA:



Type of Asset Wear and Tear Allowance Rate

the notional written down value of the asset, with the latter always being the lower value for older assets.

In this regard, the better approach may be to notionally write down the asset for the period the asset was used outside of T&T at

through this notionally written down process, the wear and tear allowance may be calculated using the prescribed rates as outlined in the Seventh Schedule of the ITA for the time the asset is used in T&T.

value assets such as rigs, seismic vessels and supply boats are frequently moved between a foreign parent company and the

recommend that the notional written down approach be reconsidered in light of the foregoing issues.

Gas Compression Facilities


Property Tax Regime

The Honourable Minister of Finance has stated that the Government is implementing the assessment of Lands and Buildings

valuation of properties.

Phase 1 would be the revaluation of all industrial buildings, including plant and machinery, whether housed or unhoused with a

The Honourable Minister did mention, however, that there would be a deductible allowance to provide relief to certain agricultural land owners and low-income homeowners.



Industrial Buildings “Old” Lands and Buildings Taxes Regime

Municipal Corporations Act

Property Tax Regime

RateBasis Annual Rateable Value (ARV)ATV/ARV

value of the building and the plant and machinery therein.

The amount of rent a tenant

to pay for the rateable hereditament, having regard to the purposes for which it is actually used, occupied or tenanted or, alternatively, for which it is reasonably suited and the machinery and plant in or upon the hereditament.

installed cost of plant, machinery and associated buildings.

The ATV is to be calculated based upon the installed cost of machinery, plant and associated buildings minus a depreciation factor calculated by the Valuation

consideration real declines

of the machinery and plant and has no reference to the accounting depreciation.

Includes Machinery & plant housed in a building (permanent

enclosure).

Machinery and plant of an industrial or commercial character or used for industrial or commercial

hereditament (warehouse, manufactory, factory and any other building installation, structure, property within a Municipality).

All immovable plant and machinery would otherwise

not housed within a building.

Excludes Open air plant & machinery (i.e. not stored within a building) not subject to Lands

Machinery and plant owned by an enterprise which is enjoying concessions as an approved enterprise under the Fiscal Incentives Act, and used for the purposes of that enterprise.

Certain buildings that are not specialized including warehouses or factory shells not adapted for special use of a particular industry to be

the annual rental value. Generally, equipment such as air conditioning and power generation facilities that support installed plant and machinery would not have


property was owner occupied or presently tenanted would not change the ATV valuation methodology which would be based

be. We welcome the Government’s phased approach and we anticipate that the Government would be mindful of the issues that

and machinery.

2009 2010 2011 2012 2013 2014 (est.)

71,414 23,976 10,347 4,657 8,838 3,914

Incentive for developers in respect of Land for Residential House Sites

In the last budget presentation and included in the Finance Act of 2013, the Government sought to introduce incentives for the

house sites where the development of such lands commenced after 1 October 2012 and the sale was consummated prior to 31

The Government has recognized that this incentive is not being utilized and, in an effort to further incentivize the construction



VAT Refunds

The business community has been plagued by delays in the accessing of VAT refunds and the related adverse impact cannot be overstated.

days after the due date for payment.

clearing the backlog of refunds.

This is a welcomed measure for manufacturers whose working capital has been seriously impacted by the delays in the processing of VAT refunds. For this measure to be successfully implemented, however, the legal timeframe in which the refunds

Motor Vehicle Accident Fund

Recently, our country has seen an upsurge in the quantity and severity of motor vehicle accidents on the nation’s roads and the

result of an accident caused by an uninsured driver.

The Honourable Minister has proposed that a Motor Vehicle Accident Fund (MVAF) be established in order to compensate such

A number of questions arise as to the administration of this measure. It is uncertain as to the eligibility of injured persons for the scheme, reimbursement limitations and whether the MVAF is restricted to IPT collected in respect of motor vehicle insurance


The ITA also states for the purpose of ascertaining the chargeable income of any person for any year of income from any trade,

and cylinder in a motor vehicle.

respect of both individuals and companies.

The above measures will take effect from 1 January 2014.

Motor Vehicle Tax Increase

ready to commence.

generally high mileage vehicles.

conversion of vehicles.

Additionally, to act as a deterrent to the use of high gas consumption vehicles, the Minister of Finance proposes to increase the

carbon footprint since it is a cleaner fuel with lower emissions.



VAT.

market reach among the wider population. Additionally, the long-lasting functionality will ultimately create a reduced total

waiver.

Capital Markets Development

incentives aimed at catalyzing the establishment of a Trinidad & Tobago Junior Market, which was to be modeled after the

public ownership threshold for each listed company was too high and this was acting as an impediment to activity in the space.

Current Legislation Proposed LegislationEligible companies must have a minimum capital after raising

Eligible companies must have at least 25 shareholders with at shareholders.

from the date of operations.


The Government remains committed to the concept of a Junior Market which will encourage domestic investment in entrepreneurship, employment and economic development. In this regard the announced amendments are designed to

capital base due to retained earnings and reserves to participate in the program.

It is our understanding that the announced changes came about as a result of representations from the business community. This suggests that the Government has been given certain undertakings that the proposed changes would have the desired effect of stimulating listings.

the incentives and remain largely closely held.

by a single shareholder.

Other MeasuresOther measures articulated in the Budget 2014 are:

Caribbean Airlines Limited (CAL)While the Honourable Minister of Finance and the Economy signalled a gradual reduction in the fuel subsidy commencing at some point in the future, he announced the discontinuance of the fuel subsidy to CAL effective 1 October 2013. He indicated, however, that the subsidy for the Tobago airlift will remain in place.

The fuel subsidy enjoyed by CAL has long been a contentious issue in the airline industry. It was recently reported that a lobby group representing airlines in the United States had taken issue with the said subsidy and was attempting to use the subsidy

America.

The subsidy has also been criticized by the regional airline LIAT on the ground that it results in unfair competition in the regional market. In this regard, Ralph Gonzales, Prime Minister of St. Vincent & the Grenadines, and the chairman of LIAT’s shareholder

would not impact the airline’s ticket pricing policy. While it is uncertain how such pricing policy will be maintained, what is certain is the impact on the airline’s bottom line, unless fundamental business changes are implemented. Perhaps the removal of the



Tax Administration

strengthen the capabilities of the Board of Inland Revenue (BIR) in the areas of enforcement, compliance and assessments. We endorse the Minister’s sentiments but would respectfully suggest that he need not reinvent the wheel. Such strengthening of the

placed in the hands of an entity set up outside of the normal public service. The result is an organization with some degree of autonomy from Government and not governed by civil service regulations. Such Authority would be given the power to recruit staff, determine compensation for its employees and control over its funding.

Minister, the Revenue Authority model does appear to be an attractive option.

with, the BIR’s ability to provide advance rulings and policy pronouncements is hampered by a lack of resources. In this regard,

rulings and policy pronouncements. Timely advance rulings and policy pronouncements by the BIR would go a long way in

We also recommend that, as a matter of policy, the BIR should promote negotiated settlements at the audit and objection stages.

eventually the subject of negotiated settlements suggesting that such matters could have been settled at a much earlier stage in

threshold. Given the stringent requirements of an independent audit, such audited accounts may be relied upon by the BIR for

Transfer PricingOn 10 October 2011, the then Minister of Finance proposed the introduction of transfer pricing rules based upon the principles

The current Minister of Finance in his Budget speech indicated that technical work is still ongoing with the introduction of

remains uncertain.


and not the arbitrary formula based rule. This should conversely allow all reasonable charges based on arm’s-length principles to

businesses to review and document their pricing arrangements among related entities.

The Insurance Bill 2013

investment of its Statutory Fund.

The Insurance Act requires insurance companies which carry on long-term business (life insurance, pensions or annuities) to maintain assets in their Statutory Fund to cover liabilities for policies owned by residents of Trinidad and Tobago and in this regard policyholders are protected in the event that the insurer is wound up or liquidated.

The Insurance Bill, 2013 currently before the Joint Select Committee will be enacted into law by the end of 2013. The enactment of the Bill will replace the current concept of the Statutory Fund with risk rated capital adequacy requirements which

insurers.

T&T.

international consultants for input into the process because of the highly technical nature of the subject matter.



Fines and PenaltiesThe Government has continued to demonstrate its commitment to tackling issues surrounding illegal activity and the

resources that could otherwise be used to generate income for the country. There is a total disregard for the environment and the law by the general population who continue to take advantage of the current system. In an effort to curb these negative

Current Penalty/Fine Proposed Penalty/Fine Comments

fuel (indictable under the

(General Provisions) Act.)

Both the goods and the vessel involved will be forfeited.Effective 1 January 2014

fuel (Under the Petroleum Act)

dayEffective 1 January 2014

Illegal quarrying on private lands

On Summary Conviction

On Subsequent Convictions

Purchase of mineral from illegal operator


of Minerals of the discovery of any minerals not authorized by the license, failure to maintain proper books or records, obstruction

of his power, or pollution of any water course in the

Breach of the Minerals Act or the Regulations where no


Current Penalty/Fine Proposed Penalty/Fine Comments

Illegal quarrying of asphaltOn Summary Conviction


Illegal quarrying of material other than asphalt



Littering – offences in respect of Individuals Effective 1 January 2014

Littering – offences in respect of Body Corporates Effective 1 January 2014


Betting Levy Board Operations


Personal Income Tax

Approved Annuity/Pension Plan/

i

ii

iii

iv

i The expense is allowed where a statement is submitted to the Board of Inland Revenue showing the name, address, NIS Number and the amount paid during the year of income for each worker.

ii The expense is allowed where the following three items are submitted to the Board of Inland Revenue:

1. Approval for the conversion into a guest house from the Minister with the responsibility for Tourism.

3. A detailed statement of the capital expenditure incurred on building material used in the conversion.

iii The expense is allowed where either of the following conditions is met and payments made to a spouse/former spouse regarding alimony/child maintenance are deemed to be income to the recipient and included in the Income Tax Return of said recipient:

1. The full amount of maintenance or separation allowance paid to a spouse under Deed of Separation or by a Court Order including a Magistrate’s Court Order.2. The full amount of alimony paid to a former spouse, provided the divorce is recognized under the Laws of the Republic of Trinidad & Tobago, and the recipient is chargeable to

tax thereon in Trinidad & Tobago.iv The tax allowance is equal to 100% of the cost of converting a motor vehicle to use Compressed Natural Gas up to a maximum expenditure of $40,000 per vehicle in an income year.


Energy Sector

landscape has been dominated by natural gas, declining production1

Having such an antiquated system govern such a vital aspect of the economy of T&T is injudicious and energies should be invested in revising the associated legislation, not only to keep abreast with the changing landscape but also to create greater certainty for investors.

in no small measure, to stimulate activity in the oil and gas sector and is certainly a step, albeit small, in the right direction.

Such positive developments include:

indication of the Government’s recognition of the increased risk to operators of deepwater activity).

horizons.

This constructive trend continues with the proposed introduction of the following measures in the Budget for 2013/14:

2014 sector review

1 See Table on Page 38


producers have responded favourably to the aforementioned measures as shown hereunder:

Upstream Developments

On another positive note, the Ministry of Energy & Energy Affairs (MOEEA) was successful in reaching an agreement with its

shore up gas supplies.

Rounds over the last decade, the MOEEA revised the process such that energy companies can nominate the Blocks of interest.

2013:

Rio Claro Block

Ortoire Block

St. Mary’s Block


39). This round is scheduled to close on 31 January 2014.

Furthermore, negotiations between the Government and a consortium comprising BHP Billiton and Repsol in relation to Block

Gas Audit

As in prior years, Ryder Scott conducted an audit of the non-associated natural gas reserves for 2012. Proven Gas Reserves stood at 13.106 TCF and a summary of trends is shown hereunder:

Downstream Developments

The downstream petrochemical industry continues to be impacted by intermittent shortages in natural gas supply due to periodic maintenance activity on aging production infrastructure.

2014 sector review Cont’d


sought to coordinate upstream gas supply with the downstream gas demand, in an effort to mitigate the adverse impact of this unfortunate, but absolutely necessary, process.

partnership with Mitsubishi of Japan, announced plans to construct facilities at the Union Industrial Estate in La Brea for the

coolants and bottles).

Greater focus is perhaps required to attract and/or stimulate investment in the downstream sector and, in so doing, we should

growth was driven by relatively strong commodity prices and the Government has budgeted crude oil and natural gas prices at


Financial Services

The modest growth of the energy sector in 2012 and continuing into 2013 highlights the importance of the non-energy sector to

eight consecutive quarters. A major contributor to the continuing resilience of the non-energy Sector is the performance of the

Landscape

component of the non-energy sector (after the distribution sector).

September 2013.



CLICO Resolution

that:

“Unlike the experience of most countries in the region, the main impetus for the rise in the debt was

1

2 each, thereby affording the unit holders a level of liquidity. The Honourable Minister reported that as a result of the CIF offering alone, up to 4,500 new brokerage accounts were opened.

The Honourable Minister reiterated in his Budget address that the major issue remaining to be resolved was the renegotiation of

Minister indicated that this contentious matter was currently engaging the attention of the Government and that international consultants were employed to ensure that adequate collateral could be put in place and an effective sales strategy implemented

The Insurance Bill, 2013

The Bill was referred to a Joint Select Committee for further consideration.

1 See “The Impact of the Global Financial Crisis on the Fiscal Accounts and Public Sector Debt in Trinidad

2


of 2013. The enactment of the Bill will replace the current concept of the Statutory Fund with risk rated capital adequacy

insurers.

Motor Vehicle Insurance Fund

The Honourable Minister acquiesced to calls by the Association of Insurance Companies for the transfer of funds collected via

compensate victims sustaining bodily injuries from accidents involving vehicles driven by uninsured drivers. The proceeds of the IPT currently are aggregated in the Consolidated Fund, so once enacted the legislation would have to clarify how such proceeds

persons suffering physical injury from uninsured drivers.

Capital Markets

oversubscribed by a multiple of just over 3.12 times and that 12,000 new brokerage accounts were opened. This demonstrates the appetite of the investor community for ownership in viable State owned enterprises.

Other notable listings on the TTSE during the year were the CIF in January 2013 (see above) and the Bourse Brazil Latin Mutual Fund in April 2013. The Bourse Brazil Latin Mutual Fund is managed by Bourse Securities Limited and consists of securities

legislation aimed at promoting the listing of small and medium sized enterprises. Based upon undertakings from industry

markets.

We also note with interest the comments of the Minister of Energy and Energy Affairs in relation to the recent acquisition by the

the public. We endorse the Honourable Minister’s comments and would welcome a continuous program of public divestment which should include the previously announced proposed public offering of the soon-to-be-merged Trinidad & Tobago Mortgage



Finance Company and Home Mortgage Bank. The recent under-subscription of the latest Government long term bond indicates the eagerness of the market for better long term returns on investments which these proposed equity offerings should bring.

Shared Services

The Honourable Minister of Finance, in his Budget Statement for 2012/2013, signalled Government’s intention to introduce

proposed legislation were not disclosed in the Budget Statement but were subsequently included in the Finance Act, 2013 and a

following incentives:

�

�Trinidad and Tobago

�services

�

�

some pride the formal opening of regional Shared Services Centres by both RBC Royal Bank and Scotiabank Trinidad & Tobago

follow suit in the near future.


Revenue - $’000 Estimates 2013

Revised Estimates 2013

Estimates 2014

Increase/ (Decrease)

35,940,656 3,254,909

Oil Companies 15,887,892 15,887,892 18,456,151 2,568,259

Other Companies 8,541,321 9,400,000 9,616,200 216,200

Individuals 5,806,739 6,102,000 6,416,845 314,845

Other 1,765,861 1,295,855 1,451,460 155,605

Taxes on Property 14,450 3,914 (4,924)

Taxes on Goods & Services (203,120)

6,670,000 6,670,000 6,409,734 (260,266)

772,274 701,922 737,193 35,271

793,199 889,195 911,070 21,875

Taxes on International Trade 2,419,325

Other Taxes 200,000 244,113 5,615

Total Tax Revenue 43,696,669

Non Tax Revenue (1,615,666)

Property Income 5,943,203 5,717,564 4,724,222 (993,342)

Other 826,196 1,629,153 994,416 (634,737)

Repayment of Past Lending 36,474 22,968 35,381 12,413

Capital Revenue 1,031,331

Borrowing 6,462,950

Total Revenue

Summary - revenue statistics


Expenditure - $’000 Estimates 2013

Revised Estimates 2013

Estimates 2014

Increase/ (Decrease)

Education 4,433,226

Recurrent 4,208,125 4,351,821 4,149,971 (201,850)

75,700 81,405 88,500 7,095

Health 4,364,300 4,320,025

Recurrent 4,148,300 4,104,025 4,083,757 (20,268)

216,000 216,000 151,500 (64,500)

Transport (12,900)

Recurrent 901,129 1,030,844 936,032 (94,812)

123,700 75,138 157,050 81,912

Works and Infrastructure

Recurrent 1,232,508 1,302,174 1,187,160 (115,014)

113,800 78,969 101,500 22,531

National Security 3,256,049

Recurrent 2,548,011 2,667,076 2,811,444 144,368

309,600 516,554 444,605 (71,949)

Finance

Recurrent 7,502,554 7,725,525 8,136,353 410,828

50,668 24,342 57,707 33,365

1,296,780 1,199,280 1,914,469 715,189

Other 35,460,120 3,121,904

Public Debt 6,410,195 4,909,440

Total Expenditure

Summary - expenditure statistics


Analysis of tax revenues

FISCAL YEAR 2014


Analysis of recurrent government expenditure

FISCAL YEAR 2014


Proposed Measures 2013 Implications Status

The following measures were proposed:

(SPT) rates for marine areas in line with post 1988 schedule of rates.

per barrel.

approved projects in deep horizons.

Enacted in the Finance Act, 2013

Fuel Subsidy Reduction of the subsidy on premium gasoline, thereby increasing the retail price per litre from 2012

Houses derived from the initial sale of newly constructed houses by registered traders where the cost of

construction commences after 1 February 2013.


for Residential Housing derived from the initial sale of land developed for residential housing where the development commenced on or after 1 October 2012 and the

2015.


Commercial Buildingsderived from the initial sale of newly constructed commercial buildings or multi-storey car parks, construction of which commenced on or after 1 October 2012.


CLICO Investment Fund (CIF)Republic Bank Limited to the CIF as well as on the transfer of units in the CIF to bond holders after the initial offer period.

paid to resident individuals and companies by the


Shared Services Introduction of legislation to incentivize the building of centralized shared services hubs in


179 of 2013


Proposed Measures 2013 Implications Status

VAT on Food Itemsalcoholic beverages. 2012

VAT on Film Equipmentequipment within the creative industries.

Closed Circuit Television (CCTV) Cameras cameras.

Increase in Business Levy Threshold Proposed increase in the Business Levy threshold Enacted in the Finance Act, 2013

Gaming Industrytables.


Art & Culture, Sporting and Audio/Visual & Video Production Allowances

Proposed increase in the quantum of the Enacted in the Finance Act, 2013

Fashion Industrythe fashion industry.


Special Reserve Police Enacted in the Finance Act, 2013

Contribution RatesProposed increases in the contribution rates and Enacted in the Finance Act, 2013


Proposed change from the current earnings class

for the purposes of computing retirement pensions.

Proposed introduction of a system for the registration of self-employed persons to govern


ten years and revising the fees payable on renewal.Enacted in the Finance Act, 2013

Inclusion of motor cycles, private school buses and motor omnibuses within the ambit of the Motor


Incentives for Light Manufacturing Proposed duty free importation of equipment for use in the light manufacturing sector for a period of two years.

cover residential, commercial, agricultural and industrial property.


EY Tax Leaders Wade M. George, BA, LLM Partner - Tax Services

manufacturing and telecommunications.

Gregory Hannays, FCCA, CA Partner - Tax Services


Anna Mouttet, BA (Hons) Accounting & Finance Senior Manager - Tax Services

inbound investments into the Caribbean for international companies and high net worth individuals. Anna was responsible for

Nassim Mohammed, BA, LLB, MBA Senior Manager - Tax Services

of Appeal. He was also the primary legal advisor to the Board of Inland Revenue on legislative issues. He spent three years as the Legal Advisor to the VAT Administration Centre.

a Revenue Authority in Trinidad & Tobago and a review of Employee Share Ownership Plans.

transactions.

Colin Ramsey, ACCA, CASenior Manager - Tax Services

industries.

Colin’s responsibilities include, among other things, managing various audits conducted by the Board of Inland Revenue, handling

several due diligence projects involving cross border acquisitions.

Trinidad & Tobago.


Shivanan Deopersad, FCCA, CAManager - Tax Services

Accountants of Trinidad & Tobago.

Alicia Fullerton, ACCA, CA

matters.

Tobago.

Eugene Christopher, FCCA, BSc.Manager - Tax Services

industries.

Trinidad & Tobago.

EY Tax Leaders Cont’d


Maria Robinson, BBA, CAPartner - Tax Services

based in Barbados and the OECS.

acquisitions and reorganizations, at the local, regional and international levels. She is a member of the Institute of Chartered

Dominique Pepin, LLB, Dip.TaxPartner - Tax Services

committee of the Barbados International Finance & Business magazine since its inception and has written articles in various

conferences held in Barbados, the United States and France.

Allison Peart, BSc, CAPartner - Tax Services

capital markets. Allison has worked with a number of clients in Jamaica across a wide range of industries including retail,

Allison is a member of the Institute of Chartered Accountants of Ontario, as well as the Institute of Chartered Accountants of


Bryan Irausquin

Zahayra de Lain

majority of due diligence work and participated in most international mergers and acquisitions. Her clients consist of global

EY Tax Leaders Cont’d


Juliette Brown

Juan Carlos Navarro Pulgar Executive Director - Caribbean-Latin America Tax Leader

the initiative of the Caribbean towards Latin America Markets.

the Oil & Gas and other sectors, advising multinational companies in different matters: mergers and acquisitions, international

Universidad Santa Maria in Venezuela and holds a Masters in Science of Professional Management from the University of Miami.


EY Caribbean LeadersExecutive ChairmanColin Soo Ping ChowTel: (868) [email protected]

Country ManagingPartners

BarbadosMaria RobinsonTel: (246) [email protected]

Trinidad & Tobago

Tel: (868) [email protected]

JamaicaAllison PeartTel: (876) [email protected]

Dutch CaribbeanErick Statius van EpsTel: (599) 9 461 [email protected]

Service Line Leaders

Assurance & AdvisoryBusiness Services


Advisory Services


Tax ServicesWade GeorgeTel: (868) [email protected]

Transaction Advisory ServicesChristopher SambranoTel: (246) 430 [email protected]

Industry Leaders

Financial Services


Hospitality & Real EstateServicesAndrew McConneyTel: (246) [email protected]

EnergyGregory HannaysTel: (868) [email protected]


Contact informationTrinidad & Tobago5/7 Sweet Briar RoadSt. Clair, Port of Spain, TrinidadTel: (868) 628-1105

21 - 25 Independence AvenueSan Fernando, TrinidadTel: (868) 652-4375/6

BarbadosWorthing, Christ ChurchBB15008, BarbadosTel: (246) 430-3900

Jamaica8 Olivier Road

Tel: (876) 925-2501

ArubaVondellaan 31Oranjestad, ArubaTel: (297) 582-4050

Curaçao

Tel: (599) 9 461-1011

St. LuciaBaywalk MallRodney BaySt. LuciaTel: (758)-722-8149

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