The new property tax regime came into effect on January 1, after a stormy passage of the legislation in both Houses of Parliament. The debate in the Senate began last Tuesday, after being passed in the House of Representatives with amendments. At the outset, it was clear that the Government was accepting no amendments in the Senate. Since this would necessitate returning to the Lower House for adoption–and there was no time for this–they wanted the laws to be in effect by January 1. Why did the bills come to the Parliament so late? To date, no one has been able to answer –or tried, for that matter. In the past, amendments arising from the budget have usually come to Parliament in October, or at least by November.
Instead, we had MPs having to eschew a Christmas break of even one week to rush through a bill during the wee hours of the morning. That disrespect demonstrated by the Government was enough to turn off anyone. Added to that, the rapid passage of the bills led to a feeling of disquiet–what was the rush? Since we have been operating for 40 years under the existing law, what difference would a few more months have made? That time might have ensured that final legislation was not flawed by ambiguities and uncertainties that exist in the bills passed.
Valuation of Land Bill
The first of the two bills to be debated in the Senate was the Valuation of Land Amendment Bill. The Amendment Act abolishes separate valuation districts. Previously, every local authority was a valuation district. Further, there is now an onus on owners to submit a return of the land form to the Commissioner of Valuations. The owner is required to include in that form, among other things, the "rental value." This is one of the obvious incongruities in the new law, as was pointed out in the Senate. There is nothing called rental value in the act; there is only annual rental value, which has a specific legal meaning. Did the Government mean this? It seems so, but on Tuesday they weren't taking any amendments.
There are other points of difficulty with this law. There is an onus on the commissioner to make a valuation of either (a) the site value and improved value or (b) capital value and annual rental value of every parcel of land. Since site value is rarely used in T&T, it is expected that the commissioner will have to do (b). The difficulty, as I see it, is that "land" is now defined in the new law as including all buildings, all structures, machinery, plant, fixtures, etc. The act puts a tremendous and difficult onus on the commissioner to place a value on not only every parcel of land in the whole of T&T, but every building, shack, plant and machinery (eg, office furniture, tools). When is this likely ever to be completed?
Annual Rental Value
The ARV is the annual rent that a particular piece of land (meaning building, plant, etc, as well) is "likely to attract." This is on what the property tax is based. Now, as far as vacant land is concerned, there is no difficulty, as the new act fixes a percentage for all types of land. So if you own a vacant lot of residential land that is valued around $200,000, the ARV is 3.5 per cent of it, $7,000. The property tax on this is at most 3 per cent, about $200.
The difficulty will arise in calculation of the ARV of occupied land. The commissioner must now make an estimate of the ARV, not only of the land, but also the buildings and all the plant and equipment (including AC units which are fixtures).
Therein lies the crunch: Taxable property is not just land–it includes almost everything that you own on that land–except for chattels. The so-called draconian nature of the new property tax lies really in the changes in valuation of property and unification of the land and building taxes. The other measures are not particularly objectionable. The forfeiture provisions existed under the old law, and were much more severe. They were never enforced, anyway. Also, having one body assessing taxes is a good thing. Previously, the corporations set their own "house rate" under the Municipal Corporations Act, while properties outside of the ambit of the corporations fell under the Lands and Buildings Taxes Act.
Under the latter act, taxes were minimal. The act specified the taxes for land. Most people paid $10. The building tax was greater, but since the law allowed the authorities to calculate the Annual Taxable Value (ATV) as 6 per cent of the capital value of the building, this is what they did. This having been calculated, the tax was 7 per cent of that value. Taxes outside the city/borough areas were thus at most a couple of hundred dollars for most property. These are the people who will feel the pinch. There is now one property tax: a given percentage of the ATV, which is really the ARV less 10 per cent for deductions.
Need for clarity
The idea of property tax reform is not a bad one. What should have been made clear is (1) why the tax exists at all, (2) how revaluations of property are to be effected now (3) how the ARV on which the tax is based is to be determined for occupied property, and (4) where citizens can access information on their particular concerns.