Trinidad and Tobago EITI exposes gaps in revenue collection systems

The 2016 report confirms Trinidad and Tobago’s sharp decline in extractives revenues and draws attention to areas of concern including unpaid transfer licenses fees, unpaid payments from quarries, weak auditing practices in companies and government agencies, and poor production data.

Decline in revenues stresses the need for optimal revenue collection

On 11 May, Trinidad and Tobago (T&T)’s EITI published its 2016 Report. The 2016 report confirms the downward trend in revenues collected from the sector. In the 2016 fiscal year, T&T received USD 1.3bn, less than half what was received in 2015. The government has responded with budget cuts and other austerity measures, including, as the report highlights, cutting fuel subsidies.

Victor Hart, Chair of the TTEITI Multi-stakeholder group (MSG) welcomed the report: “The EITI Report 2016 is the most comprehensive produced to date and civil society should find the information very useful in holding government and companies accountable for the exploitation of the country's hydrocarbon natural resources.”.

As in previous reports, TT-EITI continues to provide useful information on legal framework, licenses, production, state participation, and the sector’s contribution. Melanie Richards, Member of T&T Chamber of Industry and Commerce and the TT-EITI’s MSG, said: “I’m very pleased with the TTEITI Report which continues to provide valuable information on the extractives sector in Trinidad and Tobago. It has taken technical information and presented it in a manner that is understandable to the layman".

Importantly however, other findings from the report reveal a number of flaws in T&T’s production data and revenue collection systems.

Some improvements in data collection systems but gaps persist

The report sees improvements in tracking payments against production sharing contracts. This highlighted unpaid transfer and assignment fees. Similarly, the report identifies missing payments in the quarries sector. The National Quarries Company owes, according to the report, USD 8m to the Ministry of Energy.

The report also points out the lack of auditing data from the companies and, especially, from state-owned enterprises (SOEs). Most of the data reported through the EITI was not accompanied by audited statements. As a consequence, the report recommends that audits are conducted for the four reporting SOEs. Additionally, the report calls the government to remove any obstacles that have impeded the Auditor General’s ability to audit the Board of Inland Revenue, the tax office. The report points out that despite being mandated under the country’s Constitution, the Auditor General has not had access to Inland Revenue data.

The reporting of production data has also been criticised. Gary Aboud, Secretary, Fishermen and Friends of the Sea and a member of the TT-EITI MSG warned “The Report of the Auditor General has indicated that all extractors are reporting volumes as per their own discretion. Contradicting this EITI reported data is the fact that the essence of value is determined by volume and if that is self-proclaimed by the extractor themselves, and without regulatory oversight, then the TTEITI function is totally defeated and made into the extractors camouflage.”

Production data from small oil and gas operators is missing. In the mining sector, verification of mineral production is lacking. To tackle these issues, the TTEITI MSG group has recommended a boost to the capacity of the production monitoring units and an expansion of production data in future reports.

As always, the TT-EITI 2016 Report provides a set of recommendations to address these gaps. Recommendations include for the oil and gas sector: creating a publicly available cadastre, publishing model licensing contracts, complete disclosure of data production, making disclosure easier by simplifying confidentiality waivers and improved procedures such as monetization of gas royalties paid in-kind. In the mining sector, the report recommends simplifying and making mining licensing procedures more transparent, and verifying production data.

Trinidad and Tobago is spending more than it receives. Even whilst they are dwindling, this makes the revenues from the sector more, not less, precious. The report identifies gaps and flawed financial information as a barrier to optimal revenue collection. TT-EITI is well placed to support the implementation of its own recommendations.