Resistance to taxation

By Raffique Shah
September 13, 2009

Trinidad and Tobago News Blog

HouseTAXATION in any form meets with resistance from those who are made to pay taxes. The tide of taxation-discontent varies. In 1773 in what is now the USA, the cry “no taxation without representation” led to the American Revolution and its declaration of independence from Britain in 1776. The 1990 introduction of the infamous Poll Tax by then British Prime Minister Margaret Thatcher, led to the Iron Lady’s political demise. Now, Karen Nunez-Tesheira’s increased property tax seems poised to be the most contentious issue emanating from her pocket-full of adjusted tax measures.

I recall when I first had to pay property tax and, having done so, rushed out of the Inland Revenue office thinking they had made a mistake, and I didn’t want the officials recognising that before I left. Having assessed my property-a modest new house and a small plot of land-I was asked to pay just around $200. “Do I pay this monthly?” I asked the official, wondering whether it would not be easier to pay this tax on an annual basis. “No,” the official replied. “That’s your annual rateable tax based on our assessment of your property. It’s what you pay annually.”

I walked out of the office wondering about this next-to-nothing tax, about why government bothered with it anyway. Surely it could not bring much revenue to the Treasury, even if those whose properties were far superior to mine paid proportionally more? I thought, too, that it must cost government more to collect this tax that the overall amount collected.

So I was not at all surprised when I heard the Finance Minister announce last Monday there would be a new, increased property tax regime come 2010. In the interim I had learned a few things about similar taxes elsewhere. I heard people who owned property in the USA scream bloody murder over what they were made to pay for townhouses or apartments.

In Toronto, ownership of a CAN$200,000 condominium costs close to $10,000 in annual tax. Elsewhere in Ontario, there is a 1.5 per cent tax on the assessed value of one’s property: part of that goes directly into education, the remainder for municipal services. The average UK homeowner paid £1,146 in 2008, although there is a feeling that the poor are being made to pay much more than the wealthy.

The moment the minister announced the new property tax (still to be defined, but she said it would be no more than three per cent of the annual rentable value of one’s property) there was a hue and cry from almost all quarters. Economists swore it would “kill” middle-income citizens. The only voice of reason I heard was Afra Raymond’s, who argued that for too long local property owners have enjoyed “a free ride”. Really, if one cannot afford to pay three per cent or less for the services one enjoys (garbage collection, maintenance of roads and drains, etc) maybe one does not qualify for ownership of property.

True, when people pay taxes they ought to enjoy some benefits. For example, if the road that services the property is in woeful condition, one should be allowed generous deduction if not no taxes at all. Just as I feel that people who get no pipe-borne water ought never to have to pay WASA rates. In 2009, if the authority cannot deliver water to citizens’ homes via pipelines 24 hours a day, it should be disbanded!

There are cases to be made out for exemptions from taxes, especially property taxes. For example, pensioners who built good homes during their productive years, but who now survive on paltry “grants”, should be exempt such taxes. However, when they pass on, whoever inherits their property should be made to pay the outstanding sums-or forfeit the property to the State. Reverse mortgages are also a good tool in the hands of older people who are abandoned by their children and relatives. Under this scheme, old people can borrow on their properties in order to live reasonably comfortable lives. When they die, the ingrates who refused to take care of them must either pay up the mortgages (with interest!) or forfeit the properties.

The other caveat I would like to see introduced is one that prohibits government from spending our money on projects that do not meet with the approval of the majority of citizens. Infrastructure-roads, bridges, watercourses, sidewalks, and so on-should always take precedent over prestige projects. No Prime Minister, or any minister, must have the right to say, “I want this, so I am going to have it, whatever the cost!” Hello! It is OUR money you are playing with, not yours. You can do whatever you wish with your earnings-but not with the people’s resources. How we implement this is the billion-dollar question. I answer it in a few words: kick ’em hard in the butt!

Look at how many hundreds of millions dollars later, after he was repeatedly warned, Colm Imbert’s Cabinet colleagues find that the Rapid Rail project is not now feasible. It never was. Should we not now enjoy a “kick Colm in the butt” day in Woodford Square? How I relish the thought!

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5 thoughts on “Resistance to taxation”

  1. I don’t know of a single condo owner in Toronto who pays a $10,000 property tax on a condo valued at $200,000.If you find one, give me the name!I live in the highest priced area of Canada and a similar condo owner will pay less than $1000 per year in property taxes.And please,Mr Shah don’t suggest “reverse mortgages”. It is one of the worst ideas created for the benefit of banks only.
    You are like the finance minister.Don’t borrow ideas from abroad which cannot yet work in T&T. Wait for 2020 when you magically achieve first world status.

  2. This reminds so much of Barack Obama health plan. The principle is good, the discussion rages but the details are few. I hope madame Minister fill in the blanks soon as Obama is now trying to do. Who pays and how much?

  3. There are times when we should refrain from comparing our policies with that of the USA or Canada when we think of reforming our systems. Culture, history and living circumstances should always play an important role on how we shape our policies in order to reflect the best possible solutions and not the mere importations of ideas from one society to be imposed on us because it worked somewhere else. In many of these societies that get quoted, ‘squatting’ is not a problem and property acquisitions are much different from that in T&T. For example, here in T&T Govt is quick to tax the buyer by imposing ‘stamp duty’ and allowing the seller to go away with the ‘loot’ without having to be accountable to any form of taxation. Truth is, in these circumstances the government will get a better deal if they allow the buyer to go ahead with aquisition with the imposiion of taxes and get the owner to pay (usually with a higher priced property) a tax percentage which realizes a larger amount that would have been paid when the propperty was bought. Reverse mortages and things of that sort should be left to the developed countries and not the preditory behaviour of our banking institutions, which is yet to modify their practices to be more accommodating to the less fortunate in our society. While the property tax reform is an essential one for the better running of our system we should have a comprehensive approach where the issues affecting government, municipalities, owners, renters, bankers and mortgage holders are voiced and debated before rushing to taxation (just because there is an opportunity to do so). When the stakeholders are given the opportunity to express their views and concerns a more enlightened cause would have emerged to present and pass a fairer and equitable bill. Until then I believe that the rush to taxation just to get revenues is ill-advised and unfair to many in our country who may not be able to afford the taxation being proposed.

  4. while I agree that property owners have a responsibility for the maintenance of the infrastructure that supports their property; I’m weary of how those taxes would be utilized. as you’ve said, no roads, no water; no taxes.

  5. For too long I have felt that way about the property tax, paying a paltry $187 a year in land a building taxes? Insane. Of course I always paid and rushed out feeling like I just paid a hidden fee that no one in government ever noticed.

    In Chicago, taxes were high, but not as high as they are now, so to prevent taxies being levied unfairly on residents, they imposed a percentage annual increase cap, so homeowners were not caught unaware. Also exemptions (actually they were reductions) were put in place for Homeowners and Senior Citizens, so these taxes didn’t adversely affect them. A homeowner was classified as someone who owned and occupied the property for more than 6 months of the year in question from the first of the year. This put a dent in our tax from US$6000 on a US$250K condo to US$3.5 on such a condo. Senior citizens were entitled to a freeze as well as the homeowner exemption if they resided there, so their taxes won’t increase while they lived on fixed incomes. That seems fair to me. While people might argue that they shouldn’t have to pay extra for properties that they rent out, they’re not, they are just paying less for the one that they live in. Such a scheme could work in Trinidad, but I could see greedy landlords raising their rents to cover any increased tax they pay.

    Now, okay, we’re going to start collecting this tax. The use of it should be held accountable to only be used in community improvement projects, and not an unaccounted line in the treasury to be spent at the whim of the prime minister.

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