Caution on U-turn to property tax
The nagging issue of property taxes is back on the front burner following the statement by Finance Minister Larry Howai that a more efficient, effective and equitable version of the tax proposed by the Manning administration is needed for funding national development.
The return of this tax was always just a matter of time. Having ridden the wave of the "Axe the Tax" lobby against the proposed property tax regime, the People's Partnership Government has lacked the moral authority to introduce the issue of property taxes into the national discussion.
The problem was compounded by the mind-boggling decision in the 2010-11 Budget to terminate the existing regime of building and land taxes without replacement.
Today, another Finance Minister in the same administration is bewailing the loss of revenue to the country. We hope when he does introduce his proposal for property taxes, in whatever form and by whatever name, that Minister Howai will give the country a full accounting for the decision, the subsequent inaction, and the extent and impact of revenue foregone.
His government having led the charge against the proposed property tax regime, Mr Howai is now obligated to give the country a detailed explanation of the entire tax fiasco that has short-changed the country's development programme.
We are also eager to find out the specific ways in which the People's Partnership Government's proposal for property taxes will meet the Minister's standard for being more efficient, effective and equitable than what was previously proposed. The treasury has lost too much for us to settle for any sleight of hand effort to cover up the consequences of what, in the absence of a new tax regime, has smacked of political expediency.
Property tax is not Minister Howai's only tax headache. Indeed, he is surrounded by a plethora of them. The news that the maintenance schedule of the country's main oil companies will extend into next year continues to mean taxes foregone; the slowdown of the economy must surely be exacting its own price on taxes from the business community; the decline in consumer activity will also take a toll on VAT income while tax collection from individuals remains an imperfect science.
In setting himself the goal of reducing the deficit in his first budget, Minister Howai must find more money for funding recurrent expenditure and the capital programme over the next year. Barring a huge jump in the price of oil, he has no choice but to look hard at the tax framework.
The taxpaying public will not be happy with any new tax or increased tax in the absence of full accountability for government decision-making and expenditure.
Given the public's growing scepticism about the management of the economy, Minister Howai will want to protect his budget from the merest whiff of profligacy and political expediency.