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Historical evolution of property tax
Property taxes are not new to T&T. Indeed, the only real form of taxation prior to the 1966 Finance Act post-Independence, was the Land and Building Taxes Act (LBTA) which was introduced in April 1920.
In 1920, T&T was an agrarian economy. Our primary output and exports consisted of sugar, cocoa, coffee and citrus. Therefore, this tax was focused on what generated income in those days; land and buildings. Additionally, this system of taxation had the important objective of registering and administering the ownership of land.
As was customary in legislation of that time, the rates were not percentages but actual dollar values. Section 3 of the act speaks to an annual tax of $10 per acre or part thereof up to 10 acres, rising to $15 for acreages more than 10 acres up to 100 acres, and $20 per acre for acreages in excess 100 acres. In so doing, the act recognised the principle of progression and that those who owned the most, should pay the most.
Section 3 b) sets a minimum tax where the annual taxable does not exceed $24, a tax of 96 cents. Where the taxable value exceeds $24, a tax of 7.5 per cent of such taxable value.
The LBTA also recognised the principle of annual taxable value. This is defined in Section 2 as “gross rental value subject to the deductions and allowances in Section 10”.
Section 9 gave the district revenue officer the power to determine the annual taxable value of the building “whether such building shall be rented or not” and to consider the amount of rent a tenant “may be reasonably expected to pay for such a building and all the machinery and plant therein.”
This section goes on to indicate that the annual taxable value of the building is determined by the “purpose or purposes of the building for which it is reasonably suitable” even though it is not actually “used or occupied.”
The act establishes the administrative methodology and gives the district revenue officers power to give notices and to levy for non-payment of taxes.
But the buying power of $10 in 1920 is not the same as $10 in 2009.
Incorporating a dollar figures in the body of the act in 1920 ensured that inflation over the intervening period of 90 years reduced these figures to a peppercorn value.
By 2009 the revenue generated under the Land and Building Taxes Act was insufficient to pay for garbage collection services provided by the central government and municipal corporations. In addition, the Municipal Corporations Act gave those organisations the power to collect rates locally. In at least two corporations, the annual values were brought up-to-date on different bases and rates.
As part of the effort to modernise the tax system and ensure a uniform basis of calculation and collection, the LBTA was repealed in 2009 and replaced by the Valuation of Land Amendment Act and the Property Tax Act 2009.
It is to be noted that many of the current concerns about “valuation and annual rateable value” are principles which are contained in the Land and Building Taxes Act. In other words, the very issues on which taxpayers’ regard as being onerous are not new and are taken from the LBTA.
A comparison of the 2009 Property Act with its predecessor will show that it has simply expanded and updated the administrative areas of the 1920 Act.
There are four issues of practical significance.
1. The 2009 Act has moved from fixed-dollar payments to percentages.
2. The act moves from land and building and differentiates agricultural, residential, commercial and industrial holdings. This is significant and allows a more even differentiation of the incidence of taxation.
3. It proposes that valuations on all holdings should be brought in line with more realistic, current valuations.
4. (An important change) The number of properties or hereditaments now falling into the tax net have risen from 200,000 to over 500,000 properties.
Add to this the fact that property owners have not paid taxes for the last eight years. This has created resistance to change and, in some quarters, an unwillingness to pay.
Overcoming the reluctance of property owners requires a strong communication effort which demonstrates the value of a strong land administration process and the benefits to every citizen. It is also important to remember that land is a key part of wealth and that money knows no politics.
Mariano Browne, FCCA, is the managing partner of Elida Management Services Ltd, and a former Minister of Trade, and Minister in the Ministry of Finance. Mariano Browne
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