Home' Trinidad and Tobago Guardian : January 17th 2016 Contents SBG2 FEEDBACK
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JANUARY 17 • 2016
Iwas pleased to see that there was some discussion about the
resumption of the property tax. I was hoping that it would
shed some light on what the quantum may be. However, during
that Parliament discussion, there was no deliberation on what
formula would be applied to determine this cost to home, busi-
ness and landowners.
In an effort to contribute in some way as a citizen to a matter that
would impact our people so significantly, I present a genuine scenario
that can be considered by the powers that be when making their final
In 1973 a father (age 36 at the time) purchased a three-bedroom,
two-bathroom house in a village of one of Trinidad s picturesque
valleys at the time, at a cost of $120,000. With two working parents,
both public servants, earning jointly approximately $8,000 a month,
this family paid a monthly mortgage of approximately $2,200: given
a repayment period of 30 years.
In 2003, the house was completely paid off, at which time the
father and mother are both now retired. The father is now 66 years
old and both parents now live off a joint pension of approximately
$6,000 a month. This income now has to pay for electricity, water,
food and possibly other necessities such as medical bills.
Also, with a house this age, some degree of maintenance may be
required on an ongoing basis. Certainly a financial challenge!
In the current scheme of things, the appraised value of the same
house is now $1.8 million. Important to mention is that the appraised
value of the house is only relevant if the property is sold. But, in most
cases, such families don t sell these homes as many choose to leave
them to their children.
Now here comes the million dollar question!
What can such families afford when being asked to pay a property
tax? More importantly, what can be considered a fair taxation rate to
be determined by an equitable formula, in these commonly seen cir-
Let us look at some projections using a property value of $1.8
million. If a 0.3 per cent tax is applied, it will cost the homeowner
$5,400 annually ($450 per month). If a one per cent tax is applied,
the cost to the owner will be $18,000 ($1,500 per month).
Even at such minimal percentage taxation figures, we see a substantial
challenge for many home owners---especially retirees---whose source
of income is fixed, barely adequate to meet their monthly expenses.
I am of the view that there must be a distinction drawn between
owner-occupied properties, versus other rental and commercial prop-
erties. Usually owner-occupied properties generate no income to the
resident, therefore, the appraised value is not relevant outside the cir-
cumstances of being sold. There are provisions in the law that cater
for taxation in these circumstances.
In the situation of new home owners, we must be mindful that the
property tax further exacerbates their financial burdens with additional
monthly mortgage payments having to be shouldered.
However, properties that are rented (not owner occupied), or provide
some commercial use or value can be taxed at a rate that can be sup-
ported by the income generated by the rental or commercialised activity
that is applicable. The difficulty in what I am proposing lies with
determining which properties are owner-occupied, rental properties
or commercial spaces. This process of classifying properties and pro-
viding continuous monitoring to validate the status must be ongoing.
It is the only way that an accurate determination can be made if there
is to be fairness and overall equity in this taxation process.
As it relates to residentially approved lands, agricultural lands, com-
mercially farmed lands, and industrially-zoned estates, a distinction
must also be made to determine an appropriate tax formula after
having closely considered the usage of these properties. This formula
must be realistic and it would be wise to tie these formulas into an
accurate income projection.
Let us also be cognisant of the fact that many of the occupants
of commercially used properties are not necessarily the owners of
those properties but the owners are certainly beneficiaries of the
activities undertaken at their properties.
While I understand and agree that property tax is important as an
income generating mechanism, it is equally as important to exert the
time and effort to properly design a taxation rubric that would bear
relevance for many years to come.
Government is encouraging local
contractors to get involved in
the financing of house con-
struction, in addition to engi-
neering and construction activ-
ities. All well and good, however, there is an
issue of project management capability.
Local contractors in the building Indus-
try---particularly in the state sector---have dis-
played little understanding of project man-
agement. These contractors have mainly been
"builders," taking instructions from HDC-
nominated engineering and architectural firms
who themselves have displayed little under-
standing of project management. This is evi-
dent by the many failed housing projects that
litter our countryside with quality issues and
poor delivery schedules.
"The essence of good project management
is delivery of the project product that meets
the stakeholder expectations." In this case,
the product is the house. It should be safe to
occupy in an agreed timeline and meet the
expectations of the house owner in terms of
quality and functionality.
To address this, the Government must
include in the contractor pre-qualification
package, a requirement of formal project man-
agement training for all key contractor per-
sonnel, including subcontractors and vendors.
There should also be evidence of corporate
project management systems, involving indus-
try acceptable project monitoring, controlling
and reporting practices. These requirements
are not to be confused by the disciplined qual-
ifications and experience requirements of the
engineers, quantity surveyors, architects and
The fact is, over the years, our building
contractors have not matured their corporate
capacity in the overarching governance struc-
ture of project management. To include the
additional requirement of funding without
addressing the above-mentioned issues is
sowing the seeds of project failure.
Michael PA Charles, PMP®
Project management consultant
Whenever the economy
enters a bust, the talk
resurfaces about diver-
sification, creating new
foreign exchange income
streams. When the oil/gas market improves
the plantation continues as usual.
The question arises: are our entrepreneurs
so short-sighted that they do not realise it is
indeed necessary that some of them move
away from the import-markup-sell economic
model in an economy in which the earning
of foreign exchange provides the fuel on which
the economy runs?
Cut this fuel, as now, and the economy
stalls and the best we can do immediately is
use our reserves/foreign exchange savings to
either ride out the recession, or get a soft
landing to a lower level of economic activity.
Non exporting based private sector/government
spending cannot alleviate the recession.
There are inherent and fundamental prob-
lems that the two economists mentioned above
as glossing over.
The first is that diversification is primarily
about creating new export goods and services
that are globally competitive. Competitiveness
is today about the use of knowledge, about
inventiveness and, hence, innovation. There
are no centres in T&T that provide today the
knowledge, inventiveness and, particularly,
the innovation. General education---as we have
up to the tertiary level---does not provide the
specialised skills required to innovate, nor do
the centres of excellence that nurture those
The second concern is what products and
services should we produce? How do we
The glib talk about manufacturing is vacuous
in that what should we be manufacturing, in
which we can be globally competitive, or even
be profitable in competition with China?
Should we be making motor car wheels, or
importing in bulk and repackaging for export
to Caricom or assembling solar cells? We talk
about ICTs which are really enabling tech-
nologies---what should we be using them to
do? Build insignificant apps for mobile phones
or make telecommunication switches? Current
agriculture in T&T is high cost and the knowl-
edge systems to exploit what little we have is
non-existent. Talk about us using renewables
just to improve the efficiency of local energy
use with respect to carbon emissions provides
nothing to export.
The immediate requirement is the conduct
of a foresighting exercise in which we choose
the few technologies or industry areas in which
we think we can become globally competitive.
Saying that we are creative in culture, in clothes
design, is insufficient.
The exercise is a rigorous process that exam-
ines global current and future demands/needs
and our ability to be competitive, profitable,
in meeting some of these.
The third concern is that our current private
sector has found itself unable to adapt, to
evolve towards becoming innovative exporters.
Recall the various incentives given over the
years by government to the private sector to
build export capacity. All failed. Recall, in par-
ticular, the negative list and the Pt Lisas project.
Hence, diversification calls for the building of
a new embryonic private sector that is adapt-
able, understands the value of knowledge,
innovation in building export capacity. A spin
off of this economic rigidity of the private
sector is the lack of higher-risk financing;
venture capital, R&D grant funding etc.
Funding for the creation of the diversification
effort falls directly at the feet of government.
Is this not a role for the Heritage Fund, since
economic development is about the investment
of foreign exchange we have managed to save
(and not spent on consumption and non-pro-
ductive infrastructure) to build an economy
of the future?
The above will also require an international
thrust into marketing and market development.
The present trade missions and trade agree-
ments operate in a vacuum and have failed to
increase our exports from on-shore, simply
because on-shore activity is in general not
geared to exporting.
Diversification is necessary for our long-
term survival. But it is, at present, at best, a
vision which is useless without hard objectives
and related strategies. Our country has to build
a national innovation system whose design
we are yet to engage upon.
Mary K King
Only a national innovation system can boost T&T
to ensure a
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