The recent series of comments on this Property Tax have prompted my return to this controversial issue. Some of those comments were;
- Ved Seereeram’s 8th May 2018 article in the Trinidad Express ‘A terrible way to tax us‘,
- Professor Dilip Dan’s subsequent speculation that the tax somehow targeted Indian people and
- the many strong criticisms arising from a short Newsday article which reported my views as to the fairness of this proposed tax.
The proposed Property Tax has three main differences from the old system which ended in 2009 –
- Revised Valuations – It will be based on updated valuations. In 2009 $143M was raised, the 2017 estimates were for $503M to be raised – the 2018 estimate is $250M, likely due to the delay in passing the required law and the ongoing litigation which is now at the Appeal Court level;
- Database – It will require an open database for proper operation. This open database is the decisive element, which I welcome;
- Funds – The old system allocated those monies to local government, but the new system directs the Property Tax revenue to the consolidated fund. In my view that is detrimental to proper local government.
Property owners have had an unprecedented tax holiday, with no property tax paid since 2009. At a minimum, using the lower 2009 revenues, $1.287 Billion more remained with our property-owners.
I will touch on three of the most common objections –
- Double Taxation? – If the money used to build or buy a property is already taxed, or indeed borrowed, why should the State have the right to tax that asset? That argument is untenable since it would effectively prevent the State’s existing taxation systems in relation to companies, all of which are created by investment or borrowing.
- Subjective basis of valuation – The basis of valuation is being described as theoretical and subjective and so on, but the same methods are used for mortgage, insurance and asset valuations, with no strong objections noted.
- Owner-Occupied Property – The point is often made that the rental assumption in the Property Tax is inherently unfair since owner-occupiers do not rent their properties, they own them – so why should they be made to pay tax on this unrealistic basis? In the case of two identical properties, are these objectors saying that the owners of investment property which is rented-out should pay, but the owner-occupiers should all get a blanket exemption?
Does Property Tax discourage investment?
Finally, Seereeram claimed that the Property Tax would discourage investment amongst those property owners who were considering improvements, expansions or new construction. That is completely untrue as Property Tax can act as a trigger for development. Just consider that one of the discordant sights in our country is to see dilapidated, vandalised or abandoned properties along main roads. Or we can often see underutilised property in a bustling area which is being modernised. Why is that? The reasons are many, ranging from family disputes to entire families having migrated and so on. But the fact is that our tiny property taxes do not incentivise the resolution of those disputes or the redevelopment of those properties. Now contrast that with what we see when visiting the developed countries, in which I can scarcely remember ever seeing any such scenario. The tax rates in those districts are set at such a level and the enforcement so businesslike, that any disputed or abandoned property would soon be sold for unpaid taxes. In the case of underutilised property in those jurisdictions, it is very expensive to pay the property taxes, so the decision.
ADDENDUM: The Missing Money
These are the national totals of Property Tax paid between 1993-2009, collected as –
- House Rates, which was paid in Municipal Corporations – POS, San Fernando, Arima, Chaguanas and Point Fortin.
- Land & Building Taxes, for the rest of the country.
|Year||Land & Building Taxes||House Rates||TOTALS|
The objections from the Opposition elements are bemusing, to say the least, given the pattern of tax collections set out in the graph and table. Plainly, when the UNC was in power in the period 1995-2001, there was a dramatic and unexplained decline in the collections of Land & Building Taxes. That decline was reversed when the UNC left office