This was the inaugural budget for both the newly-elected People’s Partnership and its Finance Minister, Winston Dookeran.
The burning question for me in preparing these comments was the big one – “Is the Honeymoon over?”
In my view, the honeymoon for this new government will last about 6 months, given the sheer scale of the mess they have inherited.
There were real expectations aroused in the recent election campaign and the reduced revenues available to the State would have made the budget into a balancing-act, particularly when one considers the repeated promises of ‘No New Taxes’.
The main items on the property and construction aspects were –
- PROPERTY TAX
The Property Tax was ‘Axed’ as promised – “…The Property Tax will be replaced by the old Lands and Building Taxes regime at the old rates and old values. There will be a waiver of lands and buildings tax for the year 2010…”There has been a misleading rebuttal on this from the Opposition Leader, Dr. Keith Rowley, in that the 2011 Estimates of Revenue tell us that the Land & Building Taxes are expected to increase from $71.4M to $173.8M. Rowley’s statement would lead one to think that the property tax take would be of the order of $300M, due to the omission of the municipalities. In fact, that is not the case, since the revenue of the five municipalities (POS, San Fernando, Arima, Chaguanas and Point Fortin) are found in the Estimates of Revenue for Statutory Boards and Similar Bodies etc. Due to the fact that one of the effects of the controversial property tax was to relieve these municipalities of their powers to tax property, the 2011 estimates of revenue need to be properly interpreted. The municipalities are estimated to raise revenue of nil in 2011, since all their revenue – as well as that of the regional corporations – is collected by the Counties and transmitted to the Central Government.The true picture is that $142.52M was the estimate of revenue from property taxes in 2009 – that is the combined figure for House Rates, paid in municipalities, and Land & Building taxes paid elsewhere. We are therefore anticipating an increase in revenue from this source of the order of 18%.
No rationale was given for the waiver of property taxes for 2010, which was an astonishing decision, given the background against which the budget was drawn up.
Before I leave the property tax topic, it is interesting to consider that rental income is also subject to income tax. Not many people who own rental property actually pay income tax on that rental income – if you don’t believe me, just ask a few friends or relatives who own rental property. This seems to me to be an area in which the Finance Minister can easily collect the data and increase the State’s revenue by staying within the ‘No New Taxes’ promise and implementing the laws which are already on the books. But more on that in a later article.
The Minister of Finance made strong statements in support of home ownership, he also outlined what appears to be a merger between several State-controlled mortgage companies. No target numbers of new homes to be built were given. The Housing and Environment Minister, Dr. Roodal Moonilal, recently announced that the Housing Development Corporation’s (HDC) new output target is 6,000 new homes in 2011. The Housing and Environment Ministry have zero allocation of capital funding according to the 2011 Estimates of Expenditure. There is an allocation of $845M to the Hosuing and Settlements programme shown in the Public Sector Investment Program (PSIP). Those estimates should cross-reference with each other and the fact that they do not is cause for concern, to say the least. This is the pattern of State spending on new homes, derived from the capital allocations only –
Year Housing Ministry Capital Allocation ($M) 2008 $718.70 2009 $1,342.40 2010 $860.40 2011 $845.00
There was also the revival of an annual tax credit of $18,000 per household for first-time owners for the first five years. That measure is expected to cost $20M, which implies that just over 1,100 households will benefit from this provision. To quote – “…This measure will generate significant investment in the private sector housing industry….” Given the quantity of unsold, privately-built homes and the volume of HDC units soon to be released onto the market, it seems quite unrealistic to expect that this measure could yield ‘significant investment‘.
What is of greater concern to me is the question of whether we are at the limits of possibility as to home-ownership levels. 76% of our households now own their homes, the comparative figure for the USA is 69% and for the UK it is 68%. How realisitic is it to keep pushing for increasing home-ownership?
The HDC’s low-cost ‘Accelerated Housing Program’ stalled, with over 10,000 empty homes as proof, due to a shortage of applicants who could qualify for a mortgage.
The Minister of Finance spoke of the neglect with which our organisational and institutional infrastructure had been treated and I could not agree more. On this count, there needs to be proper consideration given to the resucitation of the Rent Control Boards. Also, the HDC needs to start giving some of those empty homes to people who just want to rent.
- Special Purpose Entities (SPEs) – What is their future in this new dispensation
Mr. Speaker, no coherent, co-ordinated planning or strategy for state enterprises exists. As a result we have begun to rationalize the state enterprises, including the special purpose companies, which will incorporate a new accountability system that goes beyond the presently operating company ordinances. It is these loopholes in public accountability that resulted in the UDeCOTT scandal. This must never again happen in Trinidad and Tobago.
Now that this just not so since there is a Performance Monitoring Guide of State Enterprises, published by the Investments Division of the Ministry of Finance in 2008. (see – http://www.finance.gov.tt/content/pub0DCE11.pdf)
This issue, as always in our country, is one of implementation. The provisions of that guide are not being followed and the wrongdoers are not being called to order.
The issue for us is to prevent the recurrence of that pattern of mismanagement and disorder in public affairs. That can only happen if we enforce the present guidelines and systems.
In the next column, I will discuss the attempt to map out a new philosophy in this budget and the CL Financial/HCU bailout.