Govt’s word games with ‘property’ tax
Politicians will continue to lose credibility and sow seeds of cynicism if the perception endures of their using words to confuse and deceive.
Real property is defined as “…the combination of land and any improvements to or on the land …” I interpret land and building to constitute real property.
Accordingly, a land and building tax is a property tax. There is no need to quibble. A rose is a rose; it is equally recognised as a flower and as vegetative material. Let us go to the core of the matter!
In the 2013 budget presentation, the Minister of Finance argued that “The back-bone of a successful land and building tax is the proper valuation of properties within a transparent framework.” He too therefore acknowledges land and building as property! The issue of substance, insofar as the public is concerned, is the calculus for determining the rate of property/land and building tax and its impact on their income. And herein lies the need for further clarification!
The impression conveyed in post-budget revelations by senior ministers is that, with respect to this matter, the Government decision is a reversion to the pre-2010 situation. Indeed, the Finance Minister explicitly stated that owners of residential property will pay the same level of land and building taxes as prevailed prior to the suspension. A leader of the “Axe the Tax” campaign claimed to be satisfied on this score.
If this is so, then what is the rationale for an updated valuation of residential property? Why the need for phased implementation? In the previous system, the tax was calculated as a given percentage of property value. The last government determined that the system required comprehensive overhaul. A key driver of change was that, for purposes of the tax, property values had remained frozen for decades, despite high and rising market prices. At the same time, property owners benefitted from the increased market values, arguably enhanced by costlier public services.
If the intent now is to retain the previous level of property tax, it is posited that there is no need for new valuations. Revaluation will inevitably lead to increased real property values! If the same rate is applied to higher values, owners will be required to pay higher property/land and building taxes; a decided change from previous levels. But perhaps, the intention is to lower the old tax rate to ensure maintenance of the status quo ante. This raises possible complications of having to apply differential tax rates, depending on property values. Higher valued property will need to attract relatively lower rates in order to maintain parity with the previous tax regime! If so, then the issue of equity in public policy may arise.
Winston R Rudder