However the minister said the economy is stable with growth anticipated at 2.5 per cent over the next few years with a target of having a balanced budget by 2016 or earlier.
The minister said the deficit represents 4.6 per cent of GDP and promised to reduce the amount by 1 per cent over the next four years. The "people-centred" measure, titled "Stimulating Growth, Generating Prosperity" does not include the $410 million constituency development fund or a property tax. While Howai had prepared the country for austerity measures he did not take away the gas subsidy, except for premium gas, which goes up to $5.75 a litre, effective Tuesday.
He said all subsidies and transfers would have to be reviewed during the coming fiscal year to refocus government expenditure to get better value for its investment while taking measures to encourage growth.
The emphasis of the budget has been on introducing measures to help people who are at the lower end of the economic ladder with a focus on housing and infrastructure, education, health and crime reduction.
Tobago would also get a significant share of the national economic pie with $2.356 billion allocated directly to the THA, mainly for development in the island, which would include making Tobago the number one destination of choice for visitors from home and abroad.
Other development projects for Tobago include a new Scarborough market, improved fishing centres, new police stations, a marina, incentives for adding additional new hotel rooms and the completion of the library.
The minister said the government would also bring closure to the CLICO and Hindu Credit Union matters. He noted that the CLICO issue has already cost the government in excess of $19 billion. He said a CLICO investment fund would be established by November 1 and trading would begin by the beginning of the new year. In addition, profits from such trading would be tax exempt.
With respect to the Hindu Credit Union, Howai said $184.9 million and approximately $60 million in payments have been made so far. People with more than $75,000 will begin receiving their funds from November 1st, 2012. The cost of the package for the HCU is $521.1 million, the minister said.
He said the cost of over $19.7 billion to bring closure to these two matters was necessary to contain "an economic and financial crisis."
The minister also announced that he plans to overhaul the entire taxation structure to make it a fairer one. Property owners would continue to enjoy a moratorium on taxes while the government develops what Howai called a "more equitable and fairer" tax regime that the one proposed by the previous regime. The new tax structure would cover residential, commercial and industrial properties.
There would also be incentives to increase the housing stock with tax breaks for private builders and developers for a limited time.
Howai told legislators the economic indicators for the country are very encouraging with foreign exchange reserves at US$10.2 billion, which is import cover for 14 months. The Heritage Stabilisation Fund, he said, has been rated at the best managed in the world with projected annual growth of 9 per cent. He said in 2012, the savings in the fund was $4.55 billion.
Some other budget measures:
- GATE would remain but would include measures to prevent abuse and waste; focus on priority studies, accountability from private institutions
- Government and unions to continue meeting to discuss policies for national development
- Unemployment at 4.9 per cent
- Private sector to become involved in CEPEP and URP
- Significant improvement to come in making T&T more business friendly
- Fuel subsidy to be reviewed
- Development of a new, better tax regime; no property tax for now
- Subsidies to be reviewed; VAT to go on essential food items
- Private sector/Government to collaborate on development and construction projects to create sustained building boom
- New highway Cumoto to San Grande; Cocorite to Chaguaramas; dualling of Rivulet Road in Point Lisas
- VAT and duty dropped on equipment for agriculture, production equipment for arts/audio visual production, security equipment
- 50% increase in most NIS benefits; pension remains at $3,000
- Aggressive tourism development for Tobago
- Food production to increase to move to food secure nation
- Gaming/entertainment industry to be regulated; big tax increases for casinos
- T&T is creditor to IMF, which means the state funds IMF instead of borrowing
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