Friday, November 28, 2008

Trinidad and Tobago Joins the Flat Tax Bandwagon

April 20, 2008

By Alvin Rabushka

Effective January 1, 2006, Trinidad and Tobago joins the ranks of the flat-tax countries. It implemented a flat tax of 25%, replacing the previous two-bracket system of 25% and 30%. Other features included raising the personal allowance from TTD (Trinidad and Tobago dollars) 25,000 to TTD 60,000 ($1 = TTD 6.265). A previously preferential TTD 40,000 allowance for individuals 60 years and over was eliminated, along with deductions of up to $18,000 for mortgage interest and $10,000 for first-time homeowners. Short-term capital gains are taxed as ordinary income.

The corporation tax was reduced from 35% to 25%, except for petrochemical and gas refining companies, which are taxed at 35%, and oil and gas exploration companies, which are taxed at 55% (of which 5% represents unemployment insurance). As of 2006, the rates for wages, salaries, self-employment income, and non-energy corporation income are a uniform 25%.

In 2008, the deduction for contributions to approved pension fund/annuity plans was increased from TTD 12,000 to TTD 25,000. The tax rate on dividends was lowered from 15% to 10%, which reduced the double tax on corporate income by 4.25%. For corporations, the first-year write-off for the cost of investment in plant and machinery was raised from 60% to 75%.

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