Make property tax fair and transparent
While strenuously avoiding the term “property tax”, the Kamla Persad-Bissessar administration has effectively restored this measure in its 2013-2014 budget. But the Prime Minister need not be coy about using the term, nor pretend citizens won’t be called upon to pay this tax. Indeed, it was the disingenuous approach taken by the previous Patrick Manning-led regime which aroused such intense antipathy to the property tax and which helped oust the People’s National Movement from office in 2010.
Even back then, few people opposed a revamped property tax—indeed, it was generally agreed, even by property owners, that the tax rate was far too low. The criticisms arose because the tax was misrepresented as a reduction and because Government ministers accused citizens of cheating the State of rightful revenues. The tax was also seen as a hasty measure introduced by an administration which had frittered away billions in energy revenue. Most importantly, the method of valuation was considered fundamentally flawed by both experts and laypeople.
The ruling People’s Partnership, however, is taking its time in resurrecting this tax. According to Finance Minister Larry Howai in his budget presentation on Monday, the tax will be implemented in three stages between 2014 and 2017—first for industrial land, then for commercial properties, and finally for agricultural land and residential properties. This timeline, not coincidentally, has the political advantage of letting the Partnership off the hook should they lose the 2015 general election.
Nonetheless, the Government should ensure that long before that, a rigorous and transparent system of property valuation is in place. In doing so, they would do well to avoid the errors of the Manning regime. The PNM’s property tax was to be calculated on a hypothetical rental value instead of the actual value of the property. Apart from being somewhat arbitrary, such an approach also facilitates corrupt valuations. Property value should be used instead, perhaps with a variable which takes account of inflated prices caused by the energy boom.
The Government should also make clear how it intends to spend the revenues collected from the new tax. This is because citizens would consider such tax payments onerous unless the revenues are used to maintain and improve public infrastructure—drains, roads, bridges—in their neighbourhoods. The Government may also want to consider placing responsibility for the residential property tax under Local Government, as part of its stated commitment to strengthening such bodies.
Once the Government adopts a system which is fair and transparent, it should have no problem getting citizens to accept this tax. If, however, it attempts to play smart with stupidness, it will very likely learn the same harsh lesson as the last regime.