Political Risk Analysis - Property Tax Implementation A Test Of Government Will - 22 MAY 2017

BMI View : Trinidad & Tobago's reintroduction of property taxes will be a test of the government's will to pursue fiscal consolidation. Though certain to prompt opposition, the effort will be key to improving the country's fiscal trajectory and sovereign credentials.

Trinidad & Tobago (T&T)'s government faces a critical test of its political will to address its wide fiscal shortfalls, as it reintroduces property taxes over the coming months, an effort that formally began in May. Although revenues declined 31.0% between 2014 and 2016, due to an 84.0% contraction of energy sector revenues, the government's fiscal adjustment has been relatively weak. Due to concerns over political pushback, the government has targeted less-visible measures including one-off asset sales to boost revenues and taxes on 'vices' including alcohol, tobacco and gambling. De facto expenditure cuts have been realised in large part due to funding constraints rather than planned cuts ( see 'Fiscal Deficits Constrained By Difficult Financing', April 21 2016).

As such, t he government's willingness to manage the political fallout from tax increases will be a key signal of its ability to narrow its fiscal shortfalls. Indeed, a successful implementation of the taxes would offer upside for our forecasts, which currently anticipate muted government efforts to address its deficits and growing macroeconomic imbalances.

Drop In Oil Revenue Will Require Policy Response
Trinidad & Tobago - Central Government Current Revenues, TTDbn
Source: CBTT, BMI

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