FISCAL TRANSPARENCY IN TRINIDAD AND TOBAGO

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000127

SIPDIS

SIPDIS

STATE FOR EEB/IFD/OMA-SNOW AND FIGUEROA
STATE FOR WHA/EPSC-MAIER AND WHA/CAR-JROSHOLT
TREASURY FOR WESTERN HEMISPHERE - JEWELL, GRAY

E.O. 12958: N/A
TAGS: EAID EFIN ECON PREL TD
SUBJECT: FISCAL TRANSPARENCY IN TRINIDAD AND TOBAGO

REF: State 16737


1. Per reftel request, Post provides the following assessment of
fiscal transparency in Trinidad and Tobago.


2. The Government of Trinidad and Tobago (GOTT) publishes revenue
and expenditure information each year in presenting its annual
budget to Parliament. Current projections as well as prior year
outcomes are published by the Ministry of Finance and also posted at
the Ministry's website, http://www.finance.gov.tt/, via the Budget
Statement, the annual Review of the Economy report, and the Public
Sector Investment Program.


3. These documents provide reliable data for all general categories
of revenue and expenditure, with explanations of any significant
changes in specific line items from year to year. For revenues, the
Review of the Economy provides numbers broken out by the various tax
and non-tax revenue sources and provides detail on energy sector and
non-energy sector revenues in relevant categories. However, the
Government does not disclose payments by individual companies
operating in the oil and gas sector. Expenditures are reported in
similar fashion, with project-related spending and foreign
assistance detailed in the Public Sector Investment Program.


4. Trinidad and Tobago passed legislation in March 2007 to convert
the existing Interim Revenue Stabilization Fund into the Heritage
and Stabilization Fund (HSF),modeled on best practices for
sovereign wealth funds and drawing on advice from the World Bank.
The legislation establishes clear rules for deposits and withdrawals
when petroleum revenues exceed or fall short of GOTT projections by
more than 10%, as well as a governance structure requiring quarterly
and annual reports to the HSF's board by a professional asset
manager. The GOTT appointed the HSF board in 2007 and as of March
2008 was in the process of recruiting a fund manager. The HSF
balance as of early 2008 was US$1.8 billion, equivalent to 11% of
GDP.


5. The most significant weaknesses in fiscal transparency in
Trinidad and Tobago relate to public procurement. Recent years have
seen a proliferation of special-purpose public enterprises that are
not required to work through the Central Tenders Board. While
budget allocations to these companies are known, questions have been
raised about the integrity of contract tender and award procedures,
particularly for infrastructure projects.


6. The GOTT issued a white paper on public procurement reform in
August 2005 but to date has not followed through on its stated
intention to table new procurement legislation. This delay reflects
a GOTT decision to put higher priority on using energy sector
revenues to fund rapid development. Asked about the status of
procurement reform in August 2007 (concurrent with the 2008 budget
presentation to Parliament),a Government minister reported that the
first draft of new procurement legislation had been rejected because
the proposed framework was cumbersome and would have slowed the pace
of government funded projects.


7. The U.S. Government has supported revenue transparency in
Trinidad and Tobago by providing advisory teams in key areas to the
GOTT on a contract basis and also through U.S. support for the
Extractive Industries Transparency Initiative (EITI). An advisory
team from U.S. Customs and Border Protection (CBP) has provided
advice on customs modernization and secure trade since 1994.
Implementation of CBP advisory team recommendations has increased
transparency, for example, by bringing customs, agriculture, and
product safety inspectors together in a one-stop-shop examination
station. Another advisory team from the U.S. Internal Revenue
Service (IRS) provided the GOTT with advice on automated tax return
processing by Trinidad and Tobago's Board of Inland Revenue (BIR)
and on the proposal to merge Customs and the BIR into a unified
revenue authority. By the time the IRS Advisory Team's contract
concluded at the end of FY-2007, the BIR automation project was
under way but not complete, while the GOTT timetable for
establishing a revenue authority has slipped to the first quarter of

2009.


8. Trinidad and Tobago was among the first developing country to
voice support for the EITI, but GOTT implementation has fallen
behind other EITI candidates. GOTT Cabinet ministers publicly
stated their commitment to follow through with EITI in
August/September 2007. Since then, however, Trinidad and Tobago has
not reported progress on candidacy criteria to the EITI Board.


9. Aside from other countries that support EITI, Post is not aware
of other donors or multilateral institutions providing assistance on
fiscal transparency. Trinidad and Tobago authorities cooperate with
the International Monetary Fund (IMF) in conducting annual Article
IV Consultations, but T&T has not volunteered for the IMF to report
on its compliance with standards and codes covering fiscal

PORT OF SP 00000127 002 OF 002


transparency.

AUSTIN