Shal­iza Has­sanali

The Gov­ern­ment has lost $600 mil­lion in the non-col­lec­tion of prop­er­ty tax over the last three years says Fi­nance Min­is­ter Lar­ry Howai. And now, he is con­sid­er­ing bring­ing back the tax–if not in the 2014 bud­get, some­time there­after."Giv­en what I am see­ing, it's prob­a­bly un­like­ly that you would get any kind of prop­er­ty tax on res­i­den­tial prop­er­ties be­cause the length of time it will take to bring those up-to-date. So it is very un­like­ly that you would see any kind of land and build­ing tax­es at that lev­el for a while.

"But again, I want to put a cap on what I said be­cause as we (Gov­ern­ment) go through the dis­cus­sions, if we come up with a pos­si­bil­i­ty, we may cer­tain­ly ex­plore those. One could see some­thing hap­pen­ing in the bud­get. At this stage, it is dif­fi­cult for me to say with any de­gree of fi­nal­i­ty that any­thing could hap­pen or not."This was Howai's re­sponse when asked if there were plans to bring back the tax in the 2014 bud­get.

"It is very like­ly that some­body could come up with some bright idea of how they could do cer­tain things. So I don't want to dis­count any of those things. As we go through the next few weeks and we (Gov­ern­ment) car­ry on the dis­cus­sions on the prop­er­ty tax, or what we are go­ing to do, or how we are go­ing to do it, if there is go­ing to be one and if it could be done, I prob­a­bly would not want to go any fur­ther with that at this stage, un­til such time we firm up the arrange­ments and per­haps, we can then say some­thing in this year's bud­get."

Howai's biggest hur­dle...Govt can face ju­di­cial re­view

Howai said his biggest hur­dle was that the rules of the tax­es first need­ed to be up­dat­ed, as dif­fer­ent prop­er­ties car­ry dif­fer­ent val­ues.It may take as much as two years to get the rules up­dat­ed as homes in each com­mu­ni­ty have to be val­u­at­ed."For ex­am­ple, one per­son may be un­der a 1990 rule, while an­oth­er per­son may be on a 1970 or a 2000 rule. So there­fore, the val­u­a­tions may be dif­fer­ent. So you can be pay­ing a sub­stan­tial­ly greater tax than your next door neigh­bour even though the prop­er­ties may be the same val­ue."

Fail­ure to ad­dress the is­sue, Howai said, can re­sult in the Gov­ern­ment fac­ing pos­si­ble ju­di­cial re­view from the pub­lic."It's not that we are fac­ing ju­di­cial re­view. There is a po­ten­tial for ju­di­cial re­view if we im­ple­ment the tax in a way that be­came in­equitable...sim­ply be­cause the rules have not been up­dat­ed. On that ba­sis, we are say­ing we need to sort that out first be­fore we could im­ple­ment that tax."Though up­dat­ing the rules start­ed a while ago, Howai said it fell through the cracks in 2010.

Retroac­tive taxnot rec­om­mend­ed

The de­lay was caused when the Peo­ple's Na­tion­al Move­ment (PNM) brought leg­is­la­tion un­der the Prop­er­ty Tax Act of 2009 that would have es­sen­tial­ly pro­vid­ed new rates up­on which prop­er­ties would have been taxed.The leg­is­la­tion was passed in De­cem­ber 2009.This prompt­ed for­mer deputy leader of the Con­gress of the Peo­ple (COP) Prakash Ra­mad­har to launch an "Axe the Tax" cam­paign.

The Peo­ple's Part­ner­ship in its 2010 man­i­festo had al­so promised to re­scind the tax if vot­ed in­to of­fice.Howai said last year he as­sessed the over­all po­si­tion and was un­able to pro­ceed with the is­sue, but he has been try­ing to put mea­sures in place to tax every­one on a con­sis­tent ba­sis.One of Howai's op­tions was to deal with the tax on a phased ba­sis."This is un­der con­sid­er­a­tion."If the tax is im­posed this year, Howai said cit­i­zens would not pay for the pe­ri­od 2010 to 2013.

"It will not be retroac­tive be­cause we have al­ready giv­en the waivers for the years up to 2013. In any event, retroac­tive tax is not a good tax."Asked how soon cit­i­zens were like­ly to see prop­er­ty tax be­ing im­posed Howai said, "I need to have some more dis­cus­sions with the com­mis­sion­er of val­u­a­tions to de­ter­mine what his time frames might be."

Pub­lic con­sul­ta­tion at all lev­els

Howai said be­fore a de­ci­sion is tak­en, there would be pub­lic con­sul­ta­tion at all lev­els.

"I think what we need to be very clear on is there is no land and build­ing tax that will be puni­tive in na­ture. That will be a heavy bur­den on in­di­vid­ual house­holds and so on. Nev­er­the­less, we recog­nise the fact that the Gov­ern­ment pro­vides ser­vices to homes. These ser­vices through­out the world are taxed. The cost of these ser­vices con­tin­ues to in­crease. As the cost in­creas­es one has to de­ter­mine how you will meet the re­quire­ments and to pro­vide a ser­vice that are lev­elled... that the con­sumer feels ac­cept­able. In or­der to do that, you have to gen­er­ate some lev­el of rev­enue to be able to cov­er the costs."

In­sist­ing that the mat­ter had not yet been dis­cussed by Cab­i­net, Howai said one needs to have a tax that is fair, eq­ui­table and trans­par­ent.In or­der to in­tro­duce the tax, Howai said all the mech­a­nisms and sys­tems need­ed to be in place to en­sure it is prop­er­ly done and every­one un­der­stands the nec­es­sary de­tails and in­for­ma­tion.He ex­plained that res­i­den­tial, busi­ness­es, in­dus­tries and agri­cul­tur­al lands would be charged dif­fer­ent rates.

$189m-$200m in tax­es an­nu­al­ly

Un­der the old land and build­ing tax­es, Howai ex­plained, the Gov­ern­ment earned be­tween $189 to $200 mil­lion an­nu­al­ly.For the last three years, Howai said on av­er­age "$600 mil­lion" in rev­enue was lost."This is a pret­ty fair sum for us. It is some­thing we have to look at. Some peo­ple say in the con­text of the na­tion­al bud­get $200 mil­lion out of $50,000 mil­lion is not a big num­ber. But I don't think so. Every hun­dred mil­lion adds up, so to speak. We most def­i­nite­ly have to con­sid­er how we are go­ing to deal with that."

Ques­tioned about the PP's promise to re­scind the prop­er­ty tax Howai said, "I don't think they cam­paigned on a plat­form that we should not have any form of land and build­ing tax­es be­cause that al­ways ex­ist­ed be­fore and it was nev­er an is­sue."Howai said prop­er­ty tax be­came an is­sue be­cause of the in­creased rates when com­pared to what peo­ple paid be­fore.

"And there­fore, peo­ple saw it as a very bur­den­some tax as it was be­ing in­tro­duced." He, how­ev­er, does not think there should be a sit­u­a­tion where there is no land and build­ing tax­es at all.He thinks the rates of the old tax need to be stopped, re­vis­it­ed and re­vised to make it more rel­e­vant to the en­vi­ron­ment.

Asked if the mat­ter was dis­cussed in Cab­i­net re­cent­ly Howai said, "We cer­tain­ly have not dis­cussed fis­cal mea­sures for next year in Cab­i­net. That is some­thing that would not be dis­cussed any time in the near fu­ture. When I say in the near fu­ture... with­in the next two or three weeks. Even­tu­al­ly we will have a dis­cus­sion about it. Cer­tain­ly, since I have been there, we had some brief dis­cus­sions around it."

Ra­mad­har: COP stooda­gainst PNM ver­sion of tax

Hav­ing fought against the PNM's pro­posed tax rates, Ra­mad­har said the COP stood against the PNM's ver­sion of the tax, which would have led to many cit­i­zens los­ing their homes as a re­sult of the ex­or­bi­tant rates."Their prop­er­ty tax had every­thing to do with ar­bi­trary val­u­a­tions, and that the mon­ey raised from tax­es would not have gone in­to the com­mu­ni­ties from which the tax­es were raised but would have gone in­to the con­sol­i­dat­ed fund."

Ra­mad­har said many of their cit­i­zens had ex­pressed the view that they want to pay prop­er­ty tax­es, but it must be fair with a prop­er as­sess­ment and that they must get ben­e­fits from that tax."So these are the philo­soph­i­cal is­sues that we will look at and see if there is to be the re­turn of a tax­a­tion on prop­er­ty. We've had the land and build­ing tax­es. So we have to be care­ful of the term and it is not as­so­ci­at­ed with the PNM's ver­sion."

Ra­mad­har said the COP stands firm with fair­ness and eq­ui­ty and "to en­sure that we are not taxed with­out prop­er­ty rep­re­sen­ta­tion."

MORE IN­FO

Pres­i­dent of the Joint Con­sul­ta­tive Coun­cil for the Con­struc­tion In­dus­try and char­tered sur­vey­or and man­ag­ing di­rec­tor of Ray­mond & Pierre Ltd, Afra Ray­mond on his afraray­mond.com Web site in De­cem­ber of 2010 stat­ed that he was in sup­port of the pro­posed changes to the prop­er­ty tax sys­tem as be­ing long over­due.

In a pre­vi­ous ar­ti­cle in 2009, Ray­mond ex­plained that the es­ti­mates of rev­enue pub­lished by the Min­istry of Fi­nance, in 1995 prop­er­ty tax was 2.0 per cent of tax rev­enue and in 2009 it was ex­pect­ed to be a mere 0.18 per cent.

"Pro­por­tion­al­ly speak­ing, prop­er­ty tax is now less than one-tenth the size it con­tributed 15 years ago. Even when one takes in­to ac­count the pre­dict­ed in­crease in prop­er­ty tax­es to $325 mil­lion in 2010, the pro­por­tion con­tributed by this source is ex­pect­ed to be 1.06 per cent of the whole tax rev­enue. Now, while this dra­mat­ic de­cline in its pro­por­tions is al­so due to the im­mense in­crease in the size of oth­er types of tax rev­enues, there are oth­er as­pects which are re­vealed on a clos­er ex­am­i­na­tion. When one con­sid­ers the im­mense stores of wealth which are held in prop­er­ty, be­yond the ba­sic fam­i­ly home, it is sober­ing to re­alise how lit­tle the sec­tor con­tributes to tax rev­enues."