PORT OF SPAIN, Trinidad (CMC) — The Trinidad and Tobago government says it expects revenue to decline by more than two billion dollars (One TT dollar=US$0.16 cents) as a result of a drop in oil prices on the global market.

Finance Minister Colm Imbert told legislators Monday that the oil-rich twin island republic could expect to suffer a shortfall of TT$2.4 billion this year if the oil prices remained depressed at about US$40 a barrel.

But as he addressed Parliament, West Texas Intermediate oil was trading at US$31.05 cents a barrel.

“This dramatic energy price shock, combined with a steady reduction in domestic production, is having a debilitating impact on our fiscal and external accounts and there will be spill over effects on (the) level of economic activity and employment,” Imbert said.

He said that tax collections from the energy sector averaged TT$26 billion or 16 per cent of gross domestic product (GDP) over the period 2010 to 2014, but fell to TT$19 billion in 2015 or 11 per cent of GDP.

Imbert said current projections were that it would fall further to TT$12 billion or seven per cent of GDP. He said those figures were for the entire energy sector, including natural gas.

Imbert, piloting the Finance Bill 2016, said the legislation sought to reform the Value Added Tax (VAT) regime, increase personal allowance for lower-income wage earners, increase the Business Levy and the Green Fund, increase personal allowance from TT$60,000 to TT$72,000 and remove the need for citizens 60 years or over to pay for passports and drivers’ permits.

During his presentation Imbert announced that the zero-rated VAT on a number of items would be removed with opposition legislators saying consumers will be paying more for many commonly used food items such as cereals, pasta, milk, butter, cooking oils, fruit juices and sweet drink, cocoa/chocolate powder and drinks, biscuits, mauby, ketchup, and yogurt, which previously were VAT-free.

Imbert said whie the legislation also seeks to reduce the 15 per cent VAT to 12.5 per cent, it would not result in lower gas prices.

“Even though we are reducing the rate of VAT from 15 per cent to 12.5 per cent, this will not result in a reduction in the price of petroleum products. Instead we will adjust the duty on petroleum products so that the prices at the pump will remain the same as announced in the national budget,” he said.

But former planning and development minister Dr Bhoendradatt Tewarie accused Imbert of enacting changes to the VAT regime with a “sleight of hand”.

He said the impact of increased food prices on ordinary persons in society will be “negative” and “unpredictable” and will lead to lower-income persons and families stretching their already stressed-out budgets to make ends meet.