Finance Minister Larry Howai is reported to have stated: "We have to bring back that property tax. It is costing the Treasury money (in lost revenue) that could be used to develop the country. I do need for us to revisit that property tax and consider introducing something more efficient, effective and more equitable than proposed previously." This is to me a curious concept of taxation. I can understand that if there is inefficiency in tax collection and taxes due are not collected this could be considered "lost revenue". But if the Government takes a policy decision not to implement a system of taxation, I find it difficult to consider this as "lost revenue". Since I am not an economist (or a banker) I shall for the purpose of this discussion accept the assertion by the Minister and apply it logically to other systems of taxation.

Thus, if the rate of direct taxation is 25 per cent and not 30 per cent that is costing the Treasury money in "revenue lost". If the rate is 30 per cent and not 35 per cent that is also money lost to the Treasury...and so on. One of the problems (or virtues?) of being 83 years old (as I am), and if your memory for years gone by is still intact, you may remember the time when the top income tax rate was 70 per cent (although you did not pay more than 50 per cent of your income in tax). As far as I can recall the roof did not fall in. But those days were pre-Ronald Reagan and Margaret Thatcher economic theory.

I should be interested to learn the results of a study of compliance in those days compared to now! I suppose the country must have been much simpler to run at that time for we had 12 ministers of government instead of 40! If the Minister of Finance is to balance the country's budget he must look at expenditure as well as income and start with proposing a reduction in the number of ministers! He might also consider drastically reducing the number of "advisers". This would also remove an impediment to good governance that now exists with the presence of senior public servants who have the responsibility for administering ministries but whose work may be undermined by the presence of advisers who have direct access to the ministers (and who sometimes have no qualification in their field of appointment).

To return to the discussion of property tax, Minister Howai is reported to have stated that he has no ideological position with respect to property tax. This is unfortunate since he is now part of a Government that took a most definite position with respect to this tax during the election campaign that brought it into power. The "axe the tax" slogan was most prominent at that time. Has the Prime Minister now appointed a "technocrat" Minister of Finance who need not adhere to the philosophy and ideology of the People's Partnership? This would indeed be an interesting development in our governance.

When the previous Government tried to introduce a new property tax, I wrote of the difficulties of achieving equity with this system of taxation. Minister Howai has stated that he wants a system that is efficient and equitable. I shall again state my concerns on how property taxation may not be equitable and shall wait with interest to hear how the Minister will address these concerns.

Traditionally property tax is based on the value of the property which is in turned based on location, size and other attributes of the property that give it value.

In fixing rates of property tax distinction should be made between business property, property rented out for profit, and owner occupied homes. It is socially desirable that each family should own a home to live in and every encouragement should be given to citizens to attain this end. The majority of owner-occupiers will be of modest income and many will be on fixed incomes such as pensioners who will feel the burden of property tax that may increase with inflation. Further, will water charges be increased since these charges are related to property values?

Assuming that a person of middle or low income at the start of his career has bought or built a house with two bedrooms, he marries and has children and as the size of his family increases he adds one or two additional bedrooms and an additional bathroom to his house which increases his property value and so his tax. Also assume that the country experiences an economic boom that results in escalated property values. By this time the home owner has reached retiring age with a reduced fixed income and is burdened with a property tax the size of which is based on the distorted property values. After enduring this hardship for some years he dies, and leaves the property to a son/daughter who is starting at the lower rank of the economic ladder. Under such circumstances the offspring is unable to meet the property tax, and so must move to a less expensive area, and so cannot enjoy the benefits which the father had worked for over many years.

In my view this will lead to an effective zoning of citizens into geographic areas according to income which has traditionally not been the case.

What of Tobago where foreign ownership of properties has led to highly distorted property values?

The argument that property tax is needed to pay for services such as garbage collection etc is false for the taxes go into general revenue and are not dedicated to particular uses.

The most equitable form of taxation is direct taxation with increasing rates for higher income earners and in today's world, in which every country is concerned that the rich are getting richer and the poor are getting poorer, an equitable, progressive system of taxation is essential. The alternative is rampant poverty, which cannot be dealt with effectively through "social protection" programmes.

• John Spence is Professor Emeritus, UWI. He also served as an Independent

Senator