?The central question which ought to inform the national debate on the proposed property tax regime change is whether there is any justification, in the first place, for a property tax system? The answer has two parts. First, one would need to address the conditions which justify taxation in general. Second, one would need to look specifically at property taxation. Both issues are parts of the same whole and cannot be discussed in isolation of each other. In earlier columns, I elaborated on the first condition (See, for details, www2.sta.uwi.edu/staff/dpantin). Today, I focus specifically on the second condition. There is justification in those who own property paying for common services which help to maintain their assets, including roads and the general physical environment abounding one's private property; provision of public utilities; garbage disposal and personal security.
Cast in this light, it is obvious that all already pay some forms of property tax: electricity and water rates, together with road tax and general taxation. Nevertheless, a case can be made for State functions specific to communities being paid for directly, if linked to four specific conditions. First, that such property taxes are earmarked (dedicated) ONLY to the identified functions. Such property tax payments would then be constitutionally barred from going into a general pool. This is not the case with the current bill which, in effect, is seeking to soak the taxpayer to help finance the $16-billion fiscal deficits of the past and current years collectively: expended, inter alia, for grandiose buildings and international meetings. The second condition is that such payments should go directly to local government authorities, who should then be accountable to the paying communities and thirdly, would then need to justify their costs, since property owners would not be willing to provide an open cheque book to finance inefficiencies, or, potentially, corruption.
Finally, property owners should then have the right to insist on value for money (ie, quality service): say, in terms of garbage disposal or environmental or minor road maintenance. If these four conditions for implementing a property tax change are satisfied, all would be better off. Local governments would have independent resources to perform their functions and not need to go "cap in hand" to the Central Government; communities would have leverage to ensure quality services; the Central Government also would now have "auditors" to ensure value for money among the empowered property owners in their communities.
Best form of property taxation?
The most equitable property tax system is one based on the initial value of the property, as currently exists. The reason is that, ultimately, all forms of taxation are of income, not assets per se. At the point of purchase or construction of a house, the owner(s) must have the necessary income. The vast majority barely make it after taking out a mortgage, and this needs to be factored into the determination of the property tax: as in the case of business, income taxation ought to be net of property expenses.
As a mortgage matures and generally the income of the owner(s) increases, the ability to pay improves, but then, ultimately, tapers off as retirement looms and arrives. The property tax system needs to be sensitive to this. There is a valid case, therefore, for those who have acquired homes to begin with lower property tax payment (ie, net of mortgage payments); then for this to increase incrementally and ultimately peak and remain relatively fixed, in recognition of the changed income profile of the houseowner(s).
Achieving nationwide equity
The costs of property protection-related community services may not be financially bearable by residents across the entire country. Hence the need to have national standards for garbage disposal, water supply, road quality, security access, etc. Surpluses generated by higher income communities can be used to subsidise others: particularly those within contiguous geographic space. In addition, other sources of tax income also can be used. Key among these would be taxation of common property assets. In all of the fuss about (personal) property taxation, most forget that we all are–including the poor and unemployed–the common owners of the natural patrimony of oil, natural gas, other minerals (quarry material, for example), forests and terrestrial and marine bio-diversity: all of which generate economic rents in their utilisation.
Successive T&T Governments and powerful technocrats and politically-connected business types have embraced the attitude of the famous French king who asserted: "L'etat: c'est moi" (I own the State), viewing the oil and natural gas resources as literally their own: to do what they see fit. This has included granting massive tax holidays while (personal) property owners are paying any range of taxes (income, VAT, etc) together with direct land taxes.
