How will Trinidad and Tobago’s new asset tax affect your investments?

The Trinidad and Tobago Government says come January 1, it will be implementing a 0.25% asset tax on commercial banks and insurance companies.

This includes companies like Republic Bank, CIBC, NCB, First Citizens, Scotiabank, and others in the sector that are listed on the Trinidad and Tobago Stock Exchange, TTSE.

According to the country’s Finance Minister, the money will be used to help fund the TT$59 billion budget for 2026. The Government expects to earn about TT$575 million from the asset tax – nearly a tenth of the budget. That’s about J$13 billion or US$87 million.

An Asset tax is a charge a company pays based on what it owns, not on the profit it makes. The assets can be anything – cash, loans, buildings, machines, and investments. So even if a bank makes less profit in a year, it would still pay the asset tax because the tax looks at the size of its assets. 

It’s different from income tax, which is a tax on the amount of money earned.

Trinidad’s government said the tax will be applied to all commercial banks and insurance companies that operate in the twin island republic, except those under the Special Economic Zones Act. 

The Finance Minister said the Government needs the money to close the budget gap and keep services running. According to the budget breakdown, the government plans to spend TT$59 billion but is only expecting to earn about TT$55 billion, even with the asset tax already factored in. That still leaves them almost TT$4 billion short.

Now, Trinidad is not the only country that has an asset tax. Jamaica has one too, but banks have been lobbying for years for its removal. They argue that it drives banking costs up, and is one of the reasons they can’t drop interest rates as fast as we’d like. 

In 2019, the Jamaican Government reduced the asset tax on financial institutions and removed it completely for non-financial ones. But people want it gone altogether. The Government had planned to cut the rate in half in 2020, but didn’t because of the pandemic. 

Back then, the financial sector agreed that there needed to be certainty in the country’s revenue collection. Just that 50% cut alone would have cost the Government J$3 billion in revenue.

So there’s obviously a good argument to keep the asset tax and in Trinidad’s case, implement it. But as the Bankers Association of Trinidad and Tobago said, the tax could hamper companies’ expansion and affect financial stability.

And it could also hamper these companies’ profitability.  So if you’re invested in the banking or insurance sectors in Trinidad, expect lower returns and dividends.

And that’s the bottom line.