Home' Trinidad and Tobago Guardian : April 6th 2017 Contents APRIL 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
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BG VIEW ANTHONY WILSON
Chief editor business
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Is property tax
now a bad idea?
It may sound strange in a country in
which tax avoidance and evasion has
become an entrenched part of the
culture, but I am actually looking
forward to paying my first property
My willingness to pay this tax is based on the
fact that millions of people around the world
pay property taxes and that the Government
has given ample notice of its intention to be-
gin collecting property taxes in the current
fiscal year for most property owners to make
the necessary adjustments to be able to fulfil
their tax obligations.
In delivering the 2017 budget presentation,
Finance Minister Colm Imbert said: "Based
on legal advice with respect to the constitu-
tionality of the proposal to collect the same
quantum of land and building taxes collected
in 2009, the Government was unable to collect
property taxes in fiscal 2016.
"We were advised that it was unconstitu-
tional to collect property taxes using the old
rates, since different rates applied in different
areas of T&T. This was permissible under the
old Land and Building Taxes act, but that act
was repealed, and without a special majority,
the imposition of the old rates and amounts
was considered to be inequitable.
"As such, the existing Property Tax Act,
which has a flat rate of three per cent, will
now be put into full effect in fiscal 2017, with
the population of the valuation rolls, minor
amendments to the relevant legislation and the
completion of the other measures required un-
der the Property Tax Act. Collection of prop-
erty tax will, therefore, commence in 2017."
The argument cannot be made that the pop-
ulation was not given ample notice.
Secondly, it seems to me that the property
tax is what the tax experts would refer to as
a progressive tax not in the classical sense of
the definition that the tax rate increases as the
taxable amount increases.
But in the sense that those with larger and
more expensive properties---which one is
obliged to assume is based on their incomes---
would pay more in property taxes than those of
us with more modest accommodations.
And those property owners who make their
livings from renting or leasing properties may
be required to contribute to the Treasury by
way of the property tax regime for the first
It strikes me, for example, that the owners
of properties around the St Augustine cam-
pus that are being rented to students, would
have enjoyed years---if not decades---of tax-
The third reason I support the imposition
of the property tax now is because on several
occasions in the last year, I have used this space
to chastise Minister of Finance, Colm Imbert,
for the length of time the current administra-
tion has taken to implement the property tax
regime and to collect taxes from the burgeoning
casino industry in T&T.
On November 3, 2016, the headline in this
space asked the question: "Will Imbert imple-
ment property tax, the T&T Revenue Authority
In that piece, reflecting on the 92 per cent
decline in energy revenues between 2014 and
2016, the point was made: "What that means is
that Mr Imbert faces the most challenging fis-
cal environment of any finance minister since
ANR Robinson in 1987, close to 30 years ago."
That piece is quoted to address the argument
raised by Opposition MP Bhoe Tewarie about
whether now is the right time to introduce the
property tax regime.
Dr Tewarie was quoted in Parliament on
March 24 as saying:
"T&T's 600,000 workers have become the
working poor, the middle class is under real
strain...given all the circumstances being faced
today, is this the most opportune time to in-
stitute this additional tax?"
On the face of it, this is a reasonable argu-
ment. But now is most definitely the right time
to introduce the property tax regime because of
the fiscal situation the country finds itself in.
If the government was faced with an $18 bil-
lion gap between the $29.2 billion in revenues
it collected from taxes in 2016 and its recurrent
expenditure of $47.5 billion, clearly one op-
tion that any responsible government would
consider would be to increase its non-energy
tax base.Clearly, that broadening of the
tax base should take place at
the same time as the admin-
istration is working on deep-
ening the process of diversi-
fication and planning for the
country's return to growth---both of which will
eventually lead to increases in non-energy tax
While the argument that the government
should reform the tax administration system
before implementing new taxes is widely held
among some segments of the local private
sector, it ignores the fact that finding new
tax revenue streams should be one option in
attempting to balance the budget.
If the government has to close the gap be-
tween the amount of money it spends and the
amount of money it earns in any fiscal year, it
would seem obvious that the range of options
for doing so should include the sale of assets,
drawing down on savings, borrowing within
reason, increasing tax revenue and making
some judicious cuts to expenditure.
It is clear to me, and it should be clear to
Dr Tewarie, that Mr Imbert has used all five
of these policy tools to close the gap between
revenue and expenditure. But he has used the
tools in a way that ensures that the burden of
adjustment is spread throughout the society,
such that it does not fall too heavily on any
It would be possible for a minister of finance
in Mr Imbert's shoes to say that all of the $18
billion adjustment should come from a sharp
reduction in the subvention to transfers and
subsidies and by reducing the amount of money
that the government pays in wages and salaries.
It seems to me that method of reducing the
gap between revenue and expenditure is pre-
ferred by the Moody's rating agency.
In a March 23 note to clients, Moody's opined
that the drawdown of US$251 million by the
current administration from T&T's Heritage
and Stabilisation Fund was "credit negative
because it reflects a deteriorating fiscal posi-
tion driven by large fiscal deficits amid lower
energy-related government revenues."
In preparing T&T for a downgrade of its
credit rating Moody's noted: "The government
has done little to change its rigid expenditure
structure, where wages, subsidies and trans-
fers account for 68 per cent of total spending."
In other words, Moody's argument is that the
burden of adjustment must be placed exclu-
sively on the backs of middle-income house-
holds by freezing or reducing their salaries and
by forcing them to pay more for services that
up to now have been subsidised.
But it should be clear to anyone that forc-
ing middle-income households to bear the
brunt of adjustment has social and political
consequences---as the people of Barbados are
This desire to ensure equity in the economic
adjustment that T&T is undergoing explains
why Mr Imbert introduced a seven per cent
tax on goods purchased online. It also explains
why he increased the tax rate on individuals
and companies earning incomes of more than
$1 million from 25 to 30 per cent.
That measure has increased the amount of
taxes paid by many businesses in this country
and has led many of them to declare reduc-
tions in their after-tax profits...as anyone who
has perused the 2016 results of publicly listed
companies will know.
If the introduction of the property tax al-
lows the minister to cut other taxes or brings
him closer to balancing his budget, then I am
probably the only property owner who thinks
it's a good idea.
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