Development economist Dr Marlene Attzs says while a reduced property tax rate may be more appealing to homeowners, it could have implications for revenue collection.
Minister of Finance Colm Imbert led off the debate on the Property Tax Amendment Bill, 2024, yesterday, after announcing that the Government would lower domestic property tax from three per cent to two per cent in Parliament last Friday. Imbert also proposed an extension of deadlines for homeowners to issue Notices of Assessment and allow additional time for property owners to lodge objections.
Speaking to Guardian Media yesterday, Attzs recalled Imbert saying that the tax to be collected would be distributed to municipal corporations, estimated at between $8-12 million, to help finance operations during his 2024 National Budget presentation. This means people who pay the tax within their municipality contribute to that corporation's financial ability to provide services to them. She said with Government reducing the tax rate, it means less money will be collected and allocated to the corporations.
“There will be that deficit based on what was anticipated or estimated to be collected from property tax and what is actually now collected. So there is going to be some shortfall that will have to be met, and I do not know what the intention is in terms of how that shortfall will be closed,” Attzs said.
Attzs said property taxes have always been part of the landscape and only stopped in 2010. She said while it was reasonable to expect a return, there was sufficient public concern about its return when there is an impending increase in the electricity rate and a spike in the cost of living. She believes Government realised this, while also realising it has some administrative issues to sort out. However, she said the reduction will have knock-on effects.
She recalled an example Imbert gave during the budget presentation: a home with an approximate Annual Rental Value (AVR) of $24,000 would accrue $648 or $54 per month in payable property tax. With the 2 per cent applied now, she said it works out to 432 per annum or roughly $36 per month, a one-third reduction.
“I think that is likely to be more palatable to homeowners. I think the concern continues to be how the Annual Rental Value is calculated. I think that is where many concerns are coming from. How is it being calculated?”
Specialist economist Dr Indera Sagewan meanwhile said homeowners will welcome the reduction as they will pay less.
But in Sagewan's view, Imbert was merely putting a plaster on a sore without dealing with the root cause: the high AVR valuations on properties.
As a homeowner, Sagewan said no valuator ever came to her home but she received a property tax valuation 33 per cent higher than she expected. She said she believes there have been sufficient cases that caused Imbert to reduce the rate to pacify homeowners. However, she said it is not enough, as even with a one per cent reduction, homeowners still have to pay a high tax based on the Government's property valuation.
“It comes down to the fact that the Government needs to take a step back from what it has done and engage in a proper valuation process. More than that, the process has to be transparent and communicated to the citizenry. We do not know the basis for arriving at the rent for the property,” Sagewan said.
She also found the interest incurred by homeowners who failed to meet the payment deadline obscene. Sagewan said it appeared that municipal corporations budgeted on an assumption of the amount of taxes they would have collected and now that those figures will not be forthcoming, they will have to adjust.