All over the world, there’s an ongoing debate about taxation.
Politicians, both at home and abroad, have argued the rich should pay a greater share towards public finances. There have been calls for energy companies currently enjoying big revenue windfalls to be subject to higher tax contributions. Amid a widely acknowledged climate crisis, there have also been calls for such companies to play an even greater role in weaning the planet off fossil fuels.
This week, the local Energy Chamber called on the Government to live up to its promise to review the taxation regime for oil and gas.
Last year, Minister of Finance Colm Imbert pledged to begin such a review, to ensure “the citizens of Trinidad get their fair share of revenues from our natural resources.”
The chamber has adopted a nuanced position on this issue. It has acknowledged supplemental petroleum tax (SPT) was designed to ensure governments benefit from the upside in times of high prices. But it called for the trigger point for such a tax to be raised, saying the decades-old US$50 per barrel trigger is now too low given changes wrought by inflation.
Additionally, the chamber proposes higher royalties for more profitable fields with lower rates on smaller, more marginal fields. All of this is in the context of the clock ticking on the use of fossil fuels, given the continued push for net-zero by 2050.
Whether or not it agrees with the chamber’s views on these matters, the Government would do well to heed the call to put this item back on its agenda. This is urgent, given the current pricing environment, as well as the expectation that Guyana will provide stiff competition when it comes to attracting international investment.
Additionally, there is even more competition on the horizon. There are reports, for instance, of Canada entering the LNG market. Such developments will become more and more common, given the move to reconfigure the international energy environment because of the impact of Russia’s continued assault on Ukraine.
The upcoming budget presentation presents the opportune moment for the Government to outline its policy position with regard to how exactly windfall revenues should be apportioned, as well as its appetite for giving concessions to companies in order to attract investment.
At the same time, the reality of the need for even greater focus on green energy and greater levels of economic diversification must also be in the foreground of the overall economic picture.
But if we are to remain involved in traditional areas in which we have shown expertise and competence, the systems around such areas should be properly positioned to make the most of the remaining time left.
They must ensure there is as little scope for error as possible when it comes to reporting measures, the accuracy of which has a direct bearing on taxation levels.
In short, the Government must not only tell us what its plans are, but it must strike the iron while hot in order to pursue long-term economic goals.