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Property Tax Can Off-Set $7bn Budget Deficit
Posted: Thursday, September 17, 2009
By Stephen Kangal
September 17, 2009
I am now becoming increasingly convinced that the proposed draconian property tax is conceived to defray most of the estimated $7bn budget deficit in the face of an aggressive attempt by Government to bring all residences including those of the new HDC settlements, agricultural lands including the Caroni two-acre farms and new business places into the new, punitive tax net. One will recall the hike in the price of premium gas last fiscal to cover the costs of the $500m Summit of the Americas. CHOGM is next.
Valuation firms will, including Raymond and Pierre, whose senior partner, Mr Afra Raymond has been the principal protagonist/ spin doctor of the tax on behalf of Government will be rewarded with lucrative consultancies/contracts to undertake the rent assessment/determination process. Neither the Valuation Division of the Ministry of Finance nor the proposed BIR/ T&T Revenue Authority will possess adequate in-house resources/expertise to accelerate the requisite assessment/listing process even though it can be done at uniform ATV that will be applicable to whole villages or settlements.
At present on the basis of the dribbles of the details given, the existing house and land taxes contribute $125m in revenues annually to the state. The lowest conservative, estimated percentage increases for each property applying the criteria for property tax determination will be at least 1000% in the urban-sub-urban areas. It will be more than 2,000% in the rural areas. Mine is estimated at an increase of 2300%. But it still remains quite a mystery and could be a shock to homeowners if the prevailing commercial and residential rental rates were to be applied.
Let us use a realistic conservative figure of a lowest 1500% increase on the taxes to be paid on current properties based on the current list of known listed, assessed and under-valued properties on the books of the respective BIR Warden Offices. Having regard to the high level of rents advertised daily in the classified columns of the print media that cannot be ignored by the BIR where one bedroom flat located in the East-West Corridor can fetch as much $3,000 per month and $2,000 in the rural heartland, the new quantum of revenues to be derived from owners of known listed properties will be around a little less than $2bn. That is astronomically way above the total expected property tax revenue provided by the Minister of Finance of $250m for all properties including the 300,000 unlisted. Mr. Afra Raymond of Valuators Raymond and Pierre has estimated an 8 times increase resulting in $1bn in revenues from the current assessed properties.
But the Minister of Finance indicated that almost 300,000 of recently built, modern high rentable valued properties including HDC houses under the three-tiered tax system, from the 800,000 taxable properties located in T&T are outside of the existing property tax net. They do not pay tax. These can be brought into the new tax system by 2010 and must be factored into the total tax collection drive. Perhaps the rental values of HDC houses will be grossly underestimated in line with the practice of dispensing political patronage through this facility to party supporters for electoral security objectives.
This category of high value properties/palatial residences/plant and machinery can potentially bring in revenues of $5bn if a uniform and consistent, objective, market-driven property tax-determination process were to be instituted and applied in an open and transparent manner based on high rentals prevailing across T&T. The property tax will in fact exacerbate an already escalating and over-heating high rental market now advertised in newspapers in US dollars. This tax can be open to corruption and nepotism and political favouritism.
The responsible response in this guava season should have been a progressive taxation in small increases and budget cuts of mega and wasteful projects - not on indiscriminate taxation without consultations by a discredited, cost-overruns stigmatised regime as if it is business as usual, Your Lordship.
The defence on behalf of the under siege mentality of the people who are living in prisons in their homes with expensive burglar proofing, high breed dogs and elaborate security systems rests its case pro bono.
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