Reinstating Property Tax in T&T should be placed in the appropriate context of what has been happening in the national economic space. This is the view of Dr Marlene Attzs.
According to Attzs, revenues for the Government in the financial year 2021 have not been at the level anticipated when Minister of Finance Colm Imbert read the budget in 2020.
Pointing to the Mid-Year Budget review in June, Attzs noted that Imbert signalled an expected shortfall of approximately $5 billion as a result of lower collections from the energy sector. She said there was also an increase in expenditures—pandemic-induced expenditures in the main—which "will drive the budget deficit to about $16.3 billion or 11 per cent of Gross Domestic Product (GDP)."
The Government spent over $5 billion in its response to the COVID-19 pandemic, Imbert said recently. He added that they are committed to providing whatever help is necessary to people adversely affected by the pandemic. "We have crossed the $5-billion mark and we intend to provide as much relief as we can. And certainly, in the next budget, there will be an amount for COVID relief, residual COVID relief going forward into 2022," Imbert added.
Attzs said the Government has been financing this additional expenditure from various sources including drawdowns from the Heritage and Stabilisation Fund (HSF) and borrowing both on the domestic and external markets,"including loans from multilaterals such as the IDB, World Bank, CAF and a loan from the China Development Bank."
"I imagine the COVID-19-induced significant expenditures may have resulted in some re-prioritisation of expenditures including money spent on transfers and subsidies, including to state enterprises as well as the postponement of some capital expenditure projects," Attzs said.
"The priority now should be on ensuring the well-being of citizens especially when some of the lockdown measures have crippled many businesses and interrupted or destroyed livelihoods."
With the current public sector debt at around 85 per cent of GDP, Attzs said "These all suggest that the shortfalls in revenue are significant and require urgent cash injections to support the Government’s levels of expenditure."
Referring to the reinstatement of the Property Tax (amended Property Tax Act 2009) as part of the conversation on how to increase the Government’s fiscal revenue given the shortfalls, Attzs said Imbert was clear in the budget presentation for 2020 that the collection of Property Tax for residential properties will be used to support the municipal corporations.
"The reality is Property Tax should not only be a source of income for Central Government but can also be used to fund local economic development strategies and projects at the municipal level."
Although municipal corporations will always list funding constraints as the reason why they cannot satisfactorily execute their mandates to their burgesses, Attzs added, "That said, there is understandably some angst about the timing of the tax and the mechanics of how, and to whom, the tax should be applied."
Given that we are still grappling with the socio-economic fallout from the lockdown measures which led to several people losing their jobs, or having to survive on reduced incomes, Attzs said "under these circumstances, it would be appropriate to reinstate the Property Tax on a phased basis, excluding the vulnerable such as those who have received Salary Relief Grants and those who receive government transfers such as pensioners and recipients of disability and other social support grants."
The UWI economist said there are other vulnerable people "for whom any addition of the Property Tax to rental incomes will impose additional hardships, especially where incomes are meagre and the households already are dealing with the costs associated with other day-to-day realities such as online schooling."
Attzs said "another thought would be, to begin with the industrial properties and then focus on residential properties at a later stage."
The rationale, she claimed, is that this is one occasion where the implementation of a policy measure could benefit from a digitalised database so there are readily available socio-economic data to support the implementation of the Property Tax, based on updated records.
The economist even suggested a novel idea, that there should be "partial or full property tax exemptions to all the frontline men and women across the health sector and protective services to whom the nation owes a debt of gratitude for their service during the pandemic."
Dr Daren Conrad.
'The tax not as onerous as being touted, but Govt must be careful how they spend'
Seeking to allay fears that Property Tax is a huge financial burden being brought to bear on the population at this time, UWI lecturer and economist Dr Daren Conrad felt that "No time will ever be a good time to implement Property Tax."
Conrad said he did not see a problem with implementing Property Tax now because the reality is that the Government has spent hundreds of millions of dollars due to COVID-19, "and if we don't do certain things to generate some additional revenue you would see the significant delays in payments such as tax refunds and contractual obligations because there is a revenue shortfall."
He said this could lead "to less and less people qualifying for certain social programmes as there is just less revenue…that is the reality."
Agreeing that millions had been spent to secure equipment and train people to carry out the valuation exercise, Conrad said this would be a waste of money if the measure is scrapped now.
Indicating that careful consideration had to be paid to which capital projects are undertaken now, Conrad cautioned, "The Government has to be very careful in how they pick and what they spend on because they just can’t take on everything."