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Briefing on the Property Tax
By Stephen Kangal
September 27, 2013
Current Status of Property Tax Legislation
At present there are no laws in our statute books empowering the state to demand and collect property taxes except Act No.17 of 2009 that amended the Valuation of Land Act and Act No.18 of 1969 (The Valuation of Land Act). Those other pre-2010 laws have been repealed by the passing and promulgation of Act 18 of 2009. The Laws repealed at the end of 2009 were:
2. Act No 18 of 2009 itself assented to on 31st December 2009 was repealed by the current PP Administration after it won the 2010 General Elections on an electoral platform of rescinding the said tax law that was subjected to intense and unprecedented regime-changing public scrutiny and public demonstrations.
- The Municipal Corporations Act was amended by the repealing of Part V
- The Land and Buildings Taxes Act
- The Tax Exemption Act
Current Budget Proposal
3. Minister of Finance Senator Larry Howai in his 2013/14 Budget statement, without holding the requisite public consultations given the active involvement of the landed gentry in getting the 2009 Act outlawed, proposes to:
4. He was of the view that this restoration of the L&B antiquated regime will restore the pre-existing tax levels status quo that prevailed until 2009 but he did say during what fiscal period this would occur and whether he had abandoned his target of achieving universal targeting of up-to-date valuations that is the determining factor in any property taxation system. He himself dubbed it the heart of any system of property taxation.
- Complete the necessary valuation of property procedures for the four classes of property at least by 2017;
- Introduce an Industrial property tax by July 2014 details of which are to be worked out. This was a provision lifted straight from Schedule I of the 2009 Act that was pegged at 5-6% of the ATV.(See excerpt set out below)
- Bring into being thereafter in 2015 a commercial property tax that was also a provision of the PNM Act of 2009
- Introduce residential and agricultural property taxes by 2017 that are also in the 2009 Act and provide for relief measures for those who cannot pay or lack the means similar to the PNM 2009 Act
- Re-instate the Land and Buildings taxes regime that was repealed in 2010 on the false assumption that the rates therein/ provisions are more lenient than those listed in the 2009 Act even it applies a rate of 7 ½ % on the Annual Taxable Value.
5. Minister Howai does not realize and hitherto has not addressed the legal fact that property tax collection in the cities and boroughs is different from that of the L&B regime and was regulated by Part V of the 1990 Municipal Corporations Act.
6. Here periodic and regular valuation of properties has reached a very advanced stage to being considered current and up--to-date (2008) and with varying rates of taxation reaching up to 10% of the ARV in the borough of Chaguanas and starting at 1% in Point Fortin.
Land and Building Taxes Confusion
7. The question also needs to be asked is why in the face of an expected completion of the requisite valuation procedures regardless of what methodology is used it would seem necessary to firstly bring back the unnecessary and confusingly superfluous L&B taxes regime into the mix in the face of an impending introduction of an industrial property tax (2014) regime and secondly (a) with no land and building taxes (residential) due until 2017 although it (L&B) contains a rate of taxation ( 7 1/2%) for homes that is more than twice that of the 2009 Act and yet The Hon PM and Minister of Finance state quite confusingly that the aim of Government is to achieve the quantum of property tax paid status quo ante-2010? It does not tally.
8. The Minister of Finance said that by the time residential property taxation kicks in 2017 valuations will be current, completed and up-to-date and given what they are saying now it will be rated at seven and a half per cent of the inflated annual taxable value ( annual rentable value rented or not less 10%) instead of the three percent stipulated in the 2009 Act. This according to the gospel of KPB is caring for T&T by unleashing a deep residential tax pit on the people of unsuspecting T&T and still saying that there would be no property tax.
9. Minister Howai has spun a property tax web around himself aided and abetted by his PM. He wants to keep the quantum of taxes to be paid (which one of the four I do not know) the same as was in 2010 when those taxes (house and land) are not due until 2018 and when there was no industrial tax per se. One cannot manipulate the valuation process unless one wants to suspend its application as was done three times before while the cities and boroughs enjoy relatively unlimited powers of property taxation on the basis of Part V of the 1990 MCA resulting in gross property tax inequity across T&T that the 2009 Act sought to rectify without success.. The planned re-introduction of the L&B is backward, regressive, confusing and counter-productive.
Statutory Mayhem and Confusion
10. I do not know how they can rationalize this confusion especially the one arising from the Minister saying property tax coming and the PM saying no property tax coming. Both are agreeing to re-introduce the abandoned Land and Building Taxes regime on top of the Industrial Tax and the Commercial Tax to add another layer of statutory mayhem since in their arithmetic of taxation 7 1/2% happens to be lesser than the PNM's 3% taxation rate using as a reference the same annual rateable or taxable value or assessed value.
The Return of Property Tax
11 To repeat myself both the Prime Minister and the Minister of Finance were at pains to emphasize that there would be no returning of property tax while at the same time proposing an industrial property tax to become effective in July 2014 as well as the reinstatement of the repealed Land and Building Taxes Ordinance. Of course they have forgotten completely Part V of the MCA 1990 that relates to the cities and boroughs that must be addressed/ re-enacted urgently on the same plane as the L&B.
12. What is needed is a holistic and well-coordinated approach so that they, that is to say the Finance Minister and the Honourable Prime Minister are reading from the same page and not contradicting each other as is shown and set out below:
The following are the relevant excerpts which seem to suggest that one is at variance with the other.
"Land and Building Tax Mr. Speaker, a land and building tax regime is a key pillar in all modern tax systems. Recurrent land and building taxes meet all the conditions of a good and fair tax. The backbone of a successful land and building tax is the proper valuation of properties within a transparent framework. This will require the property rolls being brought up-to- date. I propose to phase in these taxes over the period 2014 to 2017 during which time the properties will be valued and consultations will be held with all stakeholders.
Following the presentation of the budget by Min Larry Howai,The Hon Prime Minister had this to say at a post budget conference.
In phase 1 and effective immediately, we shall commence valuations of all industrial land, including plant and machinery, whether housed or unhoused with a view to implement this tax by July 1, 2014. In phase 2, we will impose a tax on commercial properties and in phase 3, we will impose a tax on agricultural lands and on residential properties with a
deductible allowance to provide relief to certain agricultural land owners and low-income homeowners."
(my emphasis)-Minister of Finance and the Economy,Hon Larry Howai delivering the 2013-2014 Budget.
"I want to make it very clear is that my Government will not introduce any Property Tax. There will be no property tax. What we are looking at, from what Minister Howai spoke about today, is what is known as an Industrial Tax. In fact, I have given instructions for a Bill to be drafted that will clearly take the Lands and Building Taxes as it was prior to 2010, before the law that was passed by the PNM for the Property Tax. I want to ease any of those who may be fearful that there is going to be a Property Tax, there will be no Property Tax."
13. What will be the role and function of the resurrected L&B completely escapes me because
(my emphasis)- Prime Minister Hon. Kamla Persad Bissessar
14. However should they persist with this L&B red herring that is intended to raise cosmetic hopes and false ''eye-lashes'' expectations and with the expected completed up-dating of property valuation in the words of the very Minister of Finance ( in spite of the self-deception imposed on the COP by itself by talking not even 2010 valuations and branding the tax a fairer tax)) then we can brace for a catastrophe that will assail our pockets that is greater and more damaging than what the PNM wanted to unleash on us. It will be 7 ½% of the prevailing rental value of properties given the escalating rental values of property as current property prices place them out the reach of the young and newly- wed starting a family couples.
- agricultural land and house taxes will not kick-in until 2017 when a completely new property tax regime may be introduced and
- make the archaic L&B obsolete.
No Back Taxes
15. In the face of the lacuna in the law on property taxation the question of outstanding taxes being cancelled does not arise because there is now no law demanding those taxes. No tax law can also be made retro-active to 2010.
16. If someone can watch you in the face and say that there will be no property tax when you hear and read otherwise from the Minister of Finance who can you believe?
- New property tax without consultations even on the method of determining the valuations given the active involvement of the electorate in the withdrawal of the PNM property tax regime when they voiced concerns with the rental value approach.
- Contradictions between the PM and the Finance Minister
- The confusion to be caused by the return of the L&B Taxes
- The undertaking given that valuations will be current and up-to-date preparatory to 2017 with a 7 ½% rate and up to 10% as contained in the L&B
- The impossibility of achieving the pre-2010 level and low level quantum of taxation given its high levels imposed in the boroughs and towns and up to date valuations being achieved.
- Huge and widespread incidence of inequity in the system to the disadvantage of the burgesses of the boroughs and cities.
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