Thursday, April 3, 2014

T&T's Personal Tax Allowance Becoming Meaningless

Under T&T's tax system implemented in 2006 all individual taxpayers are granted a Personal Allowance of $60,000 per year. This means that you do not pay income tax on your first $60,000 of income and 25% on amounts above $60,000. 

Since 2006 however inflation which has averaged a minimum of 9% has stolen purchasing power away from salaried workers and persons on fixed incomes. At the same time food prices have averaged annual increases of 17%. 

These exorbitant price expansions are directly as a result of Central Bank Expansion of The Money Supply. Consequently and organically salaries have been adjusted upwards to compensate for the loss in purchasing power. Unfortunately, the employee's taxable income above the allowance has also increased, therefore the employee pays proportionally more in taxes. 

In 2006 when the tax allowance of $60,000 was implemented the Ministry of Finance estimated 300,000 taxpayers were removed from net tax altogether, however with salaries chasing price increases over time only a fraction of the those taxpayers would escape the taxman's reach. In other words; as every year passes the tax allowance becomes more and more meaningless. 

To mitigate this patently unfair reality the personal tax allowance should be expanded equivalent to the rate of inflation which means tax allowances in 2014 should be at least $117,000. Any intellectually and morally honest Ministry of Finance should embrace this principle so as to offer relief to an already over taxed population

Year
Personal Tax Allowance Inflation Adjusted
Index of Retail Prices - All Items
Index of Retail Prices - Food - (Jan. 03=100)
2006
$60,000.00

23%
2007
$64,732.07
8%
17%
2008
$72,533.19
12%
26%
2009
$77,584.52
7%
13%
2010
$85,774.54
11%
22%
2011
$90,138.30
5%
10%
2012
$98,481.33
9%
14%
2013
$107,596.58
9% (est)
14% (est)
2014
$117,555.52
9% (est)
14% (est)

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