Home' Trinidad and Tobago Guardian : October 20th 2016 Contents OCTOBER 20 • 2016 www.guardian.co.tt BUSINESS GUARDIAN
COMMENTARY | BG19
When the budget pres-
entation for fiscal
2017 was read on
September 30, the
nation was faced
with the stark real-
ities of the "new normal."
Lowered oil and natural gas prices coupled
with declining production indicate that the
energy windfalls of past times can no longer
"be banked upon" to support our economy
as it has before. In light of this, the Government
was tasked with finding other avenues to gen-
erate revenue while simultaneously cutting
expenditure. One such avenue was the rein-
troduction of the Property Tax Act of 2009
which was suspended in 2011.
In his speech, the Minister of Finance
announced that this act will be put into full
effect in 2017. This will work in tandem with
the population of the valuations roll by the
Board of Inland Revenue (BIR), and minor
amendments to the Valuation of Land Act Ch
38:03 which was last amended in 2009.
The T&T Chamber of Industry and Com-
merce recognises that the Property Tax Act
has made detailed provisions for the most
vulnerable in our society. Care and attention
was given to such groups as senior citizens,
the disabled, low-income earners and the
With relevant proof of documentation, peo-
ple within such groups can receive "deferral
of the payment (either in part or full) of the
assessed tax on the land on the grounds of
the impoverished condition of the owner and
his inability to improve his financial position
significantly by reason of age, impaired health
or other special circumstances, that undue
hardship to that owner would otherwise ensue."
On the other hand, there has been much
ambiguity attached to act's definition of land.
This is the foremost critical issue that needs
to be ironed out. The term "land" not only
refers to all buildings and/or parts thereof, but
it includes machinery, plants, pipelines, cables
and fixtures erected or placed upon, in, over,
under or affixed to land.
For industrial land, the calculation of its
annual taxable value (ATV) is six per cent of
the installed cost of plant, machinery and
associated buildings, after a depreciation fac-
tor---determined by the valuation division---is
subtracted. For commercial land, the ATV is
calculated based on the expected rental value
of the property after a 10 per cent deduction
is made to accommodate for the average time
that the property may not have been rented
Given that this depreciation factor was not
stated, it is impossible to estimate the upcom-
ing cost of the tax for industrial land owners.
Other thorny matters exist such as: how will
machinery not housed in factory, but which
occupies land, be charged given that these
types of assets are depreciable.
This tax is an additional cost to the producer
or industrial/commercial land owners. If the
Government wishes to promote manufacturing
in order to increase exports, this tax on land,
and more so machinery, is counterintuitive.
The T&T Chamber wonders whether it be
more astute to charge such land categories a
lower percentage to encourage more industrial
As it stands, those who will be affected are
confronted with three options:
1. Absorb the tax, leaving prices unchanged;
2. Place the tax burden on their customers
by increasing prices; or
3. Partially absorbing some of the costs
while their consumers face a comparatively
smaller price increase, but an increase
It is unlikely that most businesspeople will
opt for the first option, leaving consumers to
face price increases. For exporters, higher
prices may lower the competitiveness of their
products in both regional and global markets.
The T&T Chamber is concerned that the
law does not bolster non-energy industries
with the potential to strengthen our economy.
Instead, it introduces what could be a disin-
centive to invest in productive non-energy
industries while potentially rendering T&T
companies less competitive.
Indeed, one might argue that the current
taxation rate on industrial land should be less
than is currently proposed to encourage further
expansion and investment in the sector.
Further, the act includes land covered by
water, and gives rise to the question of whether
it includes offshore operations of oil and nat-
ural gas companies. If it does, this may prove
to be problematic, since there are pending
issues regarding the supplemental petroleum
tax (SPT) reform to be addressed.
Moreover, this industry already pays higher
taxes of 35 per cent (corporation taxes) and
50 per cent (petroleum profit tax), respectively
for petrochemical and petroleum activities.
An additional tax may have repressive results
and serve to de-incentivise new investment
into an energy sector which will remain on
the downside of production.
By means of comparison, Barbados' Land
Tax has very similar definitions and roll out
but possesses a different definition of the term
It does not refer to land that is covered by
water. Also, given that the tourism industry
is a key industry to Barbados, a provision was
made for hotels (50 per cent reduction). T&T's
current Property Tax Act does not seem to
address this nuance in the context of Tobago
and its tourism-thrust and the imminent
arrival of Sandals Resorts. Barbados also has
special provisions for insurance firms.
Currently, T&T's insurance companies face
a two-tiered tax rate on its activity and a
pending 30 per cent incremental tax on profits
over $1 million. How will this additional tax
affect their operations and will it be addressed
by the coming Insurance Act?
The lack of clarification on how the taxable
value is to be calculated raises issues for all
tax payers, given that its expected implemen-
tation is scheduled for fiscal year 2017 and
we are fast approaching the close of the cal-
endar year for 2016.
To truly assess the potential impact of such
a tax on business (in addition to the recent
increases in both Green Fund and Business
Fund levies) is difficult, especially in light of
the many unanswered questions.
The Government has indicated that the
T&T Revenue Authority (TTRA) will also
come on stream by 2017, replacing the current
BIR as the collection agency. There is, there-
fore, a need for the speedy implementation
of the legislation itself and its ancillary insti-
tutions to support the requisite laws. If this
cannot happen, and the current rules prevail,
the BIR will continue to be the collection
agency. However, if the BIR is not efficient
in collecting the taxes due, an additional tax
will not solve the revenue shortfall being faced
While the T&T Chamber is in favour of
the re-implementation of the tax, we recognise
that there are serious issues such as those
raised here, which need to first be settled
before moving forward.
Tax Act www.chamber.org.tt
T&T Chamber of
Industry and Commerce
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