Take larger loans to pay loans, implement more taxes to fund government operations. Where are we going financially?
On March 12, Reuters reported that the Trinidad Petroleum Company secured new bank loans of US$1.4 billion in order to repay a bond of US$850 million. This means that the company will take on more debt in order to get rid of its existing debt.
The US$1.2-1.4 billion will be coming from a group of lenders including “Morgan Stanley, Credit Suisse, Panamanian trade bank Banco
The loans will be secured using the oil reserves as collateral. This means that if the government fails to pay these loans back when they are due, the reserves themselves will be up for grabs amongst the financers.
The loans are not the only thing raising serious questions. While the government runs a deficit budget and increases the taxation rates, it is also being accused of high-level corruption.
Trinidad & Tobago’s corporation tax rate went from 25% to 30% in 2018. This means, in theory, that for every dollar of profit a corporation manages to generate (after making their first million) in Trinidad & Tobago the government takes 30 cents (not accounting for deductions or credits).
Arthur Laffer, the former economic adviser to US President Ronald Reagan and the creator of the famous Laffer Curve, argues that decreasing corporation tax rates generally results in the increasing of economic growth. Our government is doing the exact opposite…
As it pertains to the deficit budget, Prime Minister Keith Rowley has stated that once the government can pay back its international loans, having a deficit budget is not necessarily a bad thing.
And more loans are on the way. Rowley added that it is not bad at all that more loans will be used to pay for the new sea ferries.
It is likely that the new ferries will be subsidized as before. Meaning that they will be operated at the expense of taxpayers, even those who do not use them. Therefore, how does the government intend to pay back this loan?
The counter argument, likely to come from the government, is that the new ferries are likely to increase trade and tourism in Tobago which will lead to economic growth. Thus allowing them to service the loan in the long term.
These climbing taxation rates and the increasing amount of debt on the government’s behalf are worrying. Our corporate tax rates are now closer to Venezuela’s than they are to economically stable countries and it appears that the less economically stable we get the higher the taxes may go.
Adding to the woes of our financial situation, new claims of high-level nepotism in the PNM government are spreading. 868 Media journalist Antonio Francis reported on the ‘Faris Fiasco’. In this story, Attorney General Faris Al-Rawi is allegedly receiving TT$575,000 per month directly from the government in a leasing deal.
Rowley claims that the government needs the building for office space and that the deal linked to Al-Rawi was the most sensible.
With so many financial inconsistencies the Trade and Industry Minister Paula Gopee-Scoon made it clear that Trinidad & Tobago is no longer in a recession. She claimed that we’ve had small growth for 2018.
Critics were fast to claim on social media that these claims are an attempt to save face before the 2020 general election.