Trinidad And Tobago Faces Downgrade Over Narrow Tax Base
by Mike Godfrey, Lowtax.net, Washington
10 March, 2016
Trinidad and Tobago has been warned by Moody's ratings agency that its Baa2 government bond and issuer ratings face a downgrade, due to the territory's reliance on oil sector revenues.
Moody's said Trinidad and Tobago is highly dependent on hydrocarbons to drive economic growth and to finance government expenditure. Oil and gas account for over 64 percent of total exports and roughly 30 percent of GDP. They also provide around 36 percent of consolidated government revenues (down from 50 percent in 2013).
Between fiscal years 2013/14 and 2014/15, total government revenue as a percentage of GDP declined by 1.4 percentage points, and the fiscal deficit increased from 2.4 percent in 2013/14 to 3.9 percent last fiscal year. Energy revenue fell from 15.4 percent of GDP in 2013/14 to 10.9 percent of GDP in 2014/15, it said.
Moody's noted that the Government has announced several measures to compensate for the fall in government revenues, such as improving the efficiency of value-added tax collection and broadening the tax base by reviewing exemptions.
Moody's said it would review the effectiveness of the Government's response over a period of about two months.
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