Property Matters – more Property Tax FAQs

The recent series of comments on this Property Tax have prompted my return to this controversial issue. Some of those comments were;

The proposed Property Tax has three main differences from the old system which ended in 2009 –

  1. 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;
  2. Database – It will require an open database for proper operation. This open database is the decisive element, which I welcome;
  3. 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 – Continue reading “Property Matters – more Property Tax FAQs”

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Property Tax Setbacks

property-tax-logo
devant-anandThe High Court issued a ruIing by Justice Frank Seepersad on Friday 19 May 2017 that the Valuation Return Forms (VRFs) which property owners had been required to complete for the implementation of the Property Tax was to be subject to a “….stay of the implementation and/or enforcement…”. That stay is pending the full hearings of the judicial review case brought by former AG, Anand Ramlogan SC, on behalf of former PP Minister, Devant Maharaj. The State has already filed an appeal and that is to be heard at the Appeal Court on Monday 22nd May 2017.

This important national policy is now before the Courts for determination as to the legality of its implementation at this time. To be sure, there are sharp political rivalries at stake here and heavy questions of how do we attain good public administration. Continue reading “Property Tax Setbacks”

AUDIO: Property Tax interview on 96.1FM

This is my interview on 96.1 FM with Nikki Crosby on Tuesday 2nd May 2017…this was a great session with Tweez…Rodey and Raw Fusion…there were also some engaging ‘phone calls and text messages from the public. Audio courtesy TTRN

Programme Date: 2 May 2017
Programme Length: 00:34:37

Property Tax FAQs

This article contains background information on the new Property Tax and answers some Frequently Asked Questions.

Getting the data
In this information age, the government was not able to create an accessible database into which property owners could have directly uploaded the required property details. Why not adopt this more efficient method to gather the information? We can, and must, do better.

Whose Taxes?
These taxes seem to be payable to the Consolidated Fund. It is my view that they ought to be collected by the respective Local Government bodies.

I support the re-instatement of the Property Tax, it is long-overdue and property owners have enjoyed a seven-year holiday since it was last collected in 2009. I have two substantial criticisms which are set out in the sidebar, but overall this is an important and positive move by the government.

There are strong objections and many questions on this new tax with two main sources – people who are genuinely unsure of how the new arrangements will work and political objectors from the Opposition.

These are the national totals of Property Tax paid in the period 1993-2009, compiled from –

  • House Rates, which is paid in Municipal Corporations, from the Estimates of Revenue and Expenditure for the Statutory Boards, Similar Authorities and the THA.
  • Land & Building Taxes, which is paid in the rest of the country, from the Estimates of Revenue.

Continue reading “Property Tax FAQs”

AUDIO: PROPERTY TAX FACTS Interview on Sky 99.5 FM

sky995fmAfra Raymond was interviewed on Tuesday 28th March 2017 on SKY 99.5 FM on the impending Property Tax by Jessie-May Ventour, Eddison Carr and Dr Wayne Haywood. There is a lot of misleading and uninformed talk on the Property Tax at the moment, so this is intended as a corrective…

Programme Date: 28 March 2017

Programme length: 00:41:04

Property Matters – Tax Facts part two

property-tax
Further details on property tax are needed to understand the process and possibilities arising from its implementation. The 2010 estimate of revenue from that tax was $325M, as against a 2017 estimate of $503M, so it seems that there has been some allowance for inflation and new properties.

The innate effectiveness of this tax is that property is an immovable asset, so those persons and companies which are now evading other taxes will be unable to escape this new tax on the various properties in their ownership.

Property owners will be required to provide details of their properties to the Ministry of Finance so that the valuation process can be started. Owners who fail to provide details will have their properties valued without their input. The only efficient method of completing that number of valuations is by a mass-valuation approach which uses software to analyse details from owners, along with transaction details, to estimate the correct figures. Continue reading “Property Matters – Tax Facts part two”

Property Matters – Tax Facts

property-taxesThe controversial property tax is now expected to be implemented in the fiscal year 2017 and is estimated to raise $503 million. That is a mere 1.7% of the total revenue estimate of $29.93 Bn from taxation. So why is it so controversial? How will it be implemented? How much can we expect to pay?

The property tax being proposed will tax the fixed assets and income streams of persons who are currently avoiding any payments of tax to our Treasury. It is relatively tiny in size, yet it can unlock disproportionate benefits in the public interest.

Our taxation system has done a poor job at levying on the self-employed and companies, as stated so often in the past. The proposed implementation of the Trinidad & Tobago Revenue Authority (TTRA) is expected to create a structure which can effectively tackle this widespread pattern of tax evasion. The previous attempt, during 2009, met with stiff opposition, so it remains to be seen if the current economic downturn will foster a different reaction. Continue reading “Property Matters – Tax Facts”

Property Tax Facts

Property Tax is back and the controversy has naturally returned since the ‘Axe the Tax‘ movement was a signal moment of unity in the anti-PNM campaigns of 2009/2010.

In my opinion, the anti-Property Tax movement was an important measure of the extent to which our national discourse is now irrational and baseless.  The disenchantment with the Manning administration and the thirst to have them removed seemed to occupy more time than any substantial discussion as to the merits of the proposed Property Tax.

Now, as then, I hold the view that our nation’s Property Tax regime is long-overdue for reform and updating.  I support the proposals to do so and we will have to wait for more detail to analyse these proposals further.

Here are a few of the basic facts on Property Tax.

The size of the Property Tax Take – Proportionally

The Estimates of Revenue disclose that in 1995 property tax was 2% of tax revenue and in 2009 it was expected to be a mere .18%.  Property tax, when last collected, contributed a small fraction of the amount it did 15 years ago.  The official projections for the Property Taxes proposed by the PNM were for that revenue to increase to $325M in 2010 – even at that level, the contribution would have barely exceeded 1% of the national tax revenue.

The Draft Estimates of Revenue (2014) published in the recently-approved budget are unclear and I have requested an official clarification before making any detailed comments on those.  As an example the Total Tax Revenue 2014 is estimated (at p. vii) to be $46.8Bn, with ‘Taxes on Property’ comprising $3.914M, which is a tiny proportion of the total, about 100,000th of 1%.  The accompanying chart, on that very page, shows Property Tax at 1% of the total.  There is more to say, but I am awaiting the requested information, hopefully before next week’s deadline.

The key point here is that property is a vibrant engine of wealth in our country and has been so for many decades, every successful person knows that.  Given that fundamental, it is obvious that property has to be properly taxed if any kind of economic justice is to emerge. The historically paltry percentage of revenues raised via Property Taxes is solid justification for a comprehensive mapping of who owns what and the where.  This is a flourishing sector of the economy, so proper taxes are long-overdue.

The size of the Property Tax Take – Absolutely

property-tax_93-09
Total Property Tax 1993-2009. Click image to see expanded version. category_expand

*The PNM’s 2009 proposal was to abolish both the L&B Taxes and the House Rates, with the replacement Property Tax anticipated to earn $325M in the year 2010 – from Ministry of Finance, Estimates of Revenue 2010 (at pg v )

The figures tell a story, since they depict an unexplained decline in Property Tax revenue from $132.16M in 1994 to $83.44M in 1995 and modest increases to $95.08M in 2001, before restoration to $129.65M in 2002.  L&B Taxes were payable outside of Municipalities, while House Rates were payable within the 5 Municipalities – POS, San Fernando, Arima, Point Fortin and Chaguanas.

According to the official records, the real decline in Property Tax income in that period occurred in non-Municipal areas, with L&B Taxes falling from $109.38M in 1994 to $60.38M in 1995, never rising above $64M, before restoration in 2002 to $94.08M.  In clear contrast, House Rates in the corresponding period rose steadily from $22.78M to $35.97M.

I am an outsider examining these aspects of the Property Tax challenge from the published record and one wonders just who is responsible for this level of sheer recklessness.  After all, 45% of the revenue from L&B Taxes vanished in a mere 12 months and in any properly-managed organisation that would send alarm bells ringing.  Over the seven fiscal years 1995-2001, an annual average of $50M in Land & Building Taxes went unpaid – which makes a total of about $350M in missing revenue, at a minimum. What was the reaction within the Board of Inland Revenue?  What steps did they take to identify and eliminate this leakage?  Was there any tax evasion?  Was anyone charged for that criminal offence?

These are essential questions to be resolved if we are to master the challenge of the proposed Property Tax  system.

The Local Government element

mc-funding-chart_2009
2009 Municipal Corporations funding. Click image to see expanded version. category_expand

Both PNM and Peoples Partnership proposed to send the Property Taxes direct to the Consolidated Fund.  The effect of that would be to reduce Municipalities to having just over 2% of their funding free from Central Government controls.  That critical element must form part of any discussion on Local Government reform.

Next week, I delve into the question of income tax on rental income and the likely levels of tax on your property.