Dili, May 21, 2019 (Lusa)
Tax Policy: No Increases, Better Administration
The East Timorese Government will not increase any taxes in the short term, but will seek to strengthen the tax authorities’ ability to collect more revenue within the current tax base, a Finance Ministry adviser said on Tuesday.
“The government in the short term will not raise taxes, but will improve the tax administration’s ability to raise more money in the current tax base,” said Helder Lopes in Dili.
Helder Lopes was speaking at the Dili presentation of the World Bank’s six-monthly report on the Timorese economy, which brought together representatives of the Government, development partners, and civil society.
Legislative Reform to Simplify Tax Changes
The adviser explained that the decision is partly due to the current legislative framework, which requires that any change — however slight — in tax rates must pass through parliament and the President.
“We want to adjust the law to try to make changes in taxes — for example — so they can be made by the Budget Law, without having to amend the basic tax law,” he said.
The special adviser to the interim finance minister noted that this tax strategy forms part of a broader fiscal reform policy covering both revenue and spending.
This implies, he said, that the distribution of public funds across sectors is determined not only by the importance of those sectors, but also by:
- Efficiency of spending
- Institutions’ ability to use money efficiently
It is in this context that the Government is beginning preparations for the 2020 State Budget (OGE), identifying priority sectors and the most effective ways to allocate funds.
Greater Sunrise and the Petroleum Fund
Despite recognising the importance of other sectors, Hélder Lopes said the development of the oil industry — including the Greater Sunrise project — remains “extremely important” for social development and the country’s long-term sustainability.
The executive’s strategy for Greater Sunrise is to find alternative sources of financing so that the Petroleum Fund serves as a last resort and final reserve for funding the project.
When asked what guarantees Timor-Leste is offering potential investors, Helder Lopes outlined the initial position:
- The guarantee will be backed by the Timor Gap balance and the future flow of revenues the project itself will generate
- Revenue from production — expected to begin in late 2025 or early 2026 — will be channelled into the Petroleum Fund
- This ensures the sustainability of what remains the main source of revenue for the OGE
“This is the initial discussion and an issue that will evolve,” he said.
World Bank: Protect Social Spending
Macmillan Anyanwu, head of the World Bank in East Timor, said Timor-Leste must consolidate public spending while protecting social services, which continue to account for a small portion of the General State Budget (OGE).
Noting that Timor-Leste is among the least-spending countries in health, the World Bank official stressed that it is important to ensure public funds are directed toward addressing the remaining challenges in the social sectors.