Finance Minister Colm Imbert says the seven per cent tax which will be imposed on online shoppers from September is expected to earn government around TT$300 million (US$45.5 million) annually – “enough to run a hospital”.
Speaking on local television on Wednesday night, he defended the decision to impose the tax that is designed to reduce revenue leakage and conserve foreign exchange. According to Imbert, US$7 billion in foreign exchange is used in the twin-island republic every year.
“We would see how it affects the demand on foreign exchange and the demand on online shopping that takes place,” he said, noting that similar taxes in other jurisdictions had been successful in discouraging online shopping.
The minister announced the tax in his mid-year Budget review last Friday, lamenting that online purchases in US dollars were putting pressure on the country’s foreign reserves.
“Online purchases are now a significant area of foreign exchange demand, which is putting a strain on our reserves, since credit card transactions are settled almost immediately. This tax is intended to help manage the increase in foreign exchange outflows from online purchases, reduce revenue leakage and assist local manufacturers and service companies to compete with overseas retailers,” he explained at the time.
Imbert subsequently stated that the tax would apply only to items above a “certain value”. That value is still to be determined.
The tax will take effect in five months, following discussions with banks and credit card companies.
However, the American Chamber of Commerce (AmCham) of Trinidad and Tobago has opposed it, with President Ravi Suryadevera suggesting earlier this week that government should make purchases under US$200 duty and Value Added Tax (VAT) free.
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