The TTWhistleblower continues a series of policy proposals which amount to an alternative budget for 2018 and beyond to forward a strategic direction for Trinidad and Tobago, for the good of all people of this country.
In Part 1, we explored the broad issues affecting Trinidad and Tobago and the course that must be set so that the right policies can drive growth, economic expansion, a better quality of life and sustainability. In Part 2 we looked at economic recovery, the Energy Sector, reform of the Public Service and expenditure audits and Public Sector Investment.
In Part 3, we examined confidence, revenue, growth and investment, and fiscal measures and in Part 4, we looked at crime and criminal activity, the justice system, economy and the property tax. In Part 5, we looked at the Health Sector, Social Services, Small Business, Education and Pensions Reform.
Today in Part 6, we look at income tax, housing and agriculture.
INCOME TAX ESCROW/BOND
Strongly linked to pensions reforms is the pre-retirement period, where persons in this category could stop paying income taxes, a portion of which will in turn revert to personal savings
Another portion of the amount of tax not paid could revert to escrow accounts that form part of the investment portfolio of the NIB
What this could achieve is a higher level of revenue for the NIB, not for recurrent spending, but for investment management to ensure that future revenue can sufficiently secure the pensions demands of a growing elderly population.
It could also allow persons nearing retirement to shore up their personal savings and private investments by having more disposable income to invest through financial institutions
By not paying income tax in the pre-retirement period, we could look at a delay in the commencement of pension payments as the personal savings accrued in the pre-retirement period will provide a buffer for continued income until pension payments begin.
In this buffer period, the NIB is given greater leverage to pursue medium term, higher yield investments that could secure the entire Pensions system.
We could also use a structure for pension and retirement benefit payments that includes Government instruments such as bonds which can be considered as part lump-sum payments to retirees
Retirees could have the option of negotiating with their own banking institutions for something similar to a ‘bankers’ acceptance’ where a fraction of the value is taken off for an early advance of the cash value.
Retirees will of course also have the option of using these bond instruments as assets to leverage post-retirement activities they wish to pursue.
The bond element of pensions can also be used as inheritances for children since a large portion of retirement benefit will be in cash, providing retirees with sufficient cash resources to maintain healthy and comfortable lifestyles.
Inheritances that include retirement bonds will of course not be subject to duties and levies that might ordinarily apply.
Yes, this will require the Government foregoing some level of revenue in order to stabilize the pensions system but the result will demonstrate how a shift in Government spending and recalibration of tax revenue from those nearing retirement will ultimately save and stabilize the Pensions system.
The added benefit of this change in policy will see a link to savings and internal training programmes by shifting to knowledge transfer as a pre-retirement requirement.
The ‘bundled savings’ could also support the NIB’s move to securing a strong pensions foundation.
Turning to housing, it is clear that the issue of home ownership has become one based on a conversation of entitlement and State support, rather than personal ambition of an empowered, trained, employed and determined professional.
Yes, there is a need for the State to participate in the provision of housing for low income families, but the manner in which the Ministry of Housing has configured its recurrent and capital spending has had a damaging effect on the Construction Industry.
According to the 2017 budget documents, the allocation to the Ministry of Housing amounted to approximately $1 billion dollars, and this was supplemented at the Mid-Year Review by almost $400 million.
Of this almost $1.4 billion, almost $500 million has gone into loan and interest payments, and a great deal was marked for loan and interest payments from projects such as the Ministry of Education Tower, the Government Campus and the Tarouba Stadium.
With the Government scoring a dismal 61% PSIP utilization rate, and with almost $500 million being spent before it is even received, this means that of the remaining $900 million, after a large chunk is spent on recurrent expenses, the capital expenditure programme becomes severely constrained.
Here again, the question must be why the Government believes it must involve itself in the business of home construction, rather than maintain a regulator role in ensuring that the quality of housing meets stringent benchmarks.
Like the Health Sector, the Housing sector requires a highly efficient private sector approach to ensure much greater value for money, stronger focus on quality and timely delivery and effective governance to eliminate the avenues for corruption and nepotism.
In this regard, the Housing Development Corporation should be audited and given the mandate to brings its operations into a more efficient, value driven, quality oriented, profit making entity.
The possibility exists that the Housing Development Corporation could become one of those companies, once appropriately reformulated, that could be divested so that home owners not only have the benefit of owning assets such as a home, but also owning shares in the company that provided their home.
For six months, the Housing Development Corporation should also be given the mandate to stabilize its application process, and this may require working on Saturdays. For far too long we have heard of the backlog that exists in the HDC of applications for public housing, and horror stories of people who have been waiting for years and at times, over a decade for appropriate responses.
That kind of system has no place in an efficient, lean and results oriented Government and as such, focus should be given to bringing its applications into line with housing provision based on the established policy for qualification.
The Ministry of Housing’s HDC should also enter into partnership with the Trinidad and Tobago Mortgage Finance Company and the Home Mortgage Bank, with a view to negotiating on behalf of clients, housing construction and purchase opportunities.
The Government cannot reasonably provide housing to every single applicant, but what it can do is provide a level of support in approaching these mortgage companies for persons who do not qualify under the HDC, but could qualify through the TTMF and HMB.
To address the level of non-payments for owned and rented HDC facilities, the Government should pursue an amnesty for everyone who owes over six months of payments to the HDC.
If we are starting afresh, then we must do so by clearing the books and ensuring that going forward, a stronger payment and collections system exists.
Yes, we understand that rough economic times mean that persons are at times unable to meet commitments, but HDC clients must also understand that in challenging times, they too must prioritise their spending. And ensuring that the roof over your head remains, payments must be one of your most urgent priorities.
Agriculture is also an area of tremendous concern, requiring focused attention to be the kind of industry that can:
- Support satisfactory income and profit for farmers;
- Satisfy a large portion of our local food needs;
- Keep food price inflation down, and
- Preserve foreign exchange reserves without burdening people or economic sectors.
In June 2016, when he announced the possibility of Sandals Resorts setting up shop in Tobago, the Prime Minister spoke of agriculture as if mocking the toil of farmers, and ridiculing the fundamental thrust of the Agriculture Industry.
The Prime Minister said, as reported in the Trinidad Express of 15 June 2016: “How much tomato we go plant? How much bhaigan we go plant? How much pumpkin we go plant? That is not to say, you know, I like my cassava and my dasheen and my potato and my bhaigan, but in terms of talking about earning the foreign exchange to maintain the standard of living we have become accustomed to, we gotta think big and move fast—and that is what Trinidad and Tobago is doing now under this Government.”
Yet, in the 2017 budget, the Finance Minister sang a different tune, saying: “We are moving to achieve self-sufficiency in our food requirements by reducing the cost of production and we are doing so in a manner to ensure income security for our farmers and reduced prices for consumers.”
The Finance Minister also stated that the Government was moving to ‘revitalise’ the coconut growing and cocoa growing industries.
The 2017 PSIP spoke of “Government’s policy to create a strong, modern, prosperous and competitive agriculture sector in order to improve the nation’s food security and to be one of the major contributors to diversification of the economy of Trinidad and Tobago.”
The 2017 PSIP stated: “A total allocation of $242.2 million was provided to the Ministry of Agriculture, Land and Fisheries in 2016.
Of this amount, $156.2 million was allocated under the Consolidated Fund, while the Infrastructure Development Fund received $86 million. Expenditure in the amount of $51.4 million was utilized for the projects undertaken during 2016.”
The Government also committed through the 2017 PSIP: “In 2017 an investment of $112 million will be made, to support the goal of the Government to diversify the economy and to continue the programme of works in the Agricultural Sector aimed at ensuring food security and reduction of the national food import bill.”
PSIP Funding for Agriculture for 2017 was $105.9 million, while in 2016, it was $135.4 million.
The story is different if we look the Review of the Economy 2016, which states: “A contraction of 6.0 percent is anticipated in the Agriculture sub-sector, weaker than the sub-sector’s 1.2 percent growth attained during 2015.”
The ROE 2016 also stated: “Agriculture’s share of real GDP is however expected to remain unchanged at 0.4 percent in 2016.”
And: “Driving this outlook is reduced economic activity in the largest agricultural sub-sector, Domestic Agriculture which is estimated to decline by 9.3 percent in 2016, its worst performance since 2010.”
This is the Prime Minister’s comments were deliberately quoted earlier; to demonstrate how a lack of seriousness by the Government and a disregard for the importance of the sector actually influences its output and growth.
And while speaking of incentivizing and supporting agriculture, the Government has publicly expressed its intention to apply Property Taxes to agricultural lands, giving even more reason for the intelligent bystander to surmise that the Rowley/PNM Administration has absolutely no interest in the Agriculture Sector whatsoever.
If we look at the kind of production the agriculture sector has recorded, we see even more evidence. The Central Bank uses seven vegetable growing areas to measure Agricultural food output, and this is what the Central Bank has recorded:
|Date||Production of Tomatoes (000’s Kgs)||Production of Cabbage (000’s Kgs)||Production of Cucumber (000’s Kgs)||Production of Dasheen (000’s Kgs)||Production of Pigeon Peas (000’s Kgs)||Production of Pumpkin (000’s Kgs)||Production of Melongene (000’s Kgs)|
Between January 2011 and January 2017, the production of tomatoes, cabbage and cucumber declined, while the production of dasheen, pigeon peas, pumpkin and melongene increased.
What is required for the Agriculture Sector is dedicated leadership at the level of the Ministry and its various Departments, and a real demonstration of how a Government will incentivize and reward stakeholders in farming and livestock production.
To begin with, this alternative budget proposes that all agricultural land holdings and small-scale farmers should be exempt from the Property Tax.
Agriculture should also be formally adopted as one of the key economic diversification sectors to tangibly demonstrate the importance the sector holds in the sustainable development of Trinidad and Tobago.
Discussions should begin immediately with the key stakeholder groups in the Agriculture sector including crop-farming, livestock, packaging and processing with a view to zero-rating the key inputs into Agriculture production, and supporting the development of Agriculture processing and exports.
A Disaster Relief Fund should be set up with an initial injection of $25 million specifically for the Agriculture Sector to ensure that immediate, substantial support is forthcoming in the aftermath of natural disasters to all registered and legitimate farmers and agricultural land holdings.
The recent experience with Tropical Storm Bret and the subsequent bureaucratic and process delays in delivering relief to affected families, and more particularly, farmers, demonstrates how the State appears to be structured against the growth and sustainability of the Agriculture Sector.
It should not be that promises are made to do better; the setting up of a Disaster Relief Fund specifically for Agriculture is a way to clearly demonstrate the seriousness of promises to support agriculture, and also ensure that farmers can look to the future with confidence in their own success and their contribution to GDP.
A target should be set to increase the Agriculture Sector’s contribution to GDP to 1% by the year 2020, and thereafter, by 2% by the year 2025.
What this means is that Agriculture is now be given the serious attention it deserves, in the context of training and skills development; financial support and funding; fiscal policy; disaster preparedness; infrastructure; tax-incentives and achievable production targets.
The intended results will be an increase in local food production, expansion of agricultural exports, increase in participation in the sector and Foreign Reserves savings.