Last update: 13-Dec-2013 3:20 am
Friday, December 13, 2013
Trinidad & Tobago Guardian Online
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Property tax: Why tax equipment?
The land and building tax issue issue has once again reared its head and I will once again put forward my comments. First of all, the tax is necessary and I welcome it. Where my concerns arise is with the method of determining the tax and also the implications of the tax.
Finance Minister Larry Howai has indicated a phased approach. This is fine, but what I can’t understand is why he is even considering plant and equipment as part of the basis for calculating the tax. The tax is a property tax, not a tax on your assets. What is the significance of the value of my equipment? Is my tax going to change every time I change equipment? If I own a warehouse and rent to other companies, does this mean that every time my tenant changes, so does my tax?
Before I can give a tenant a rental rate, I need to factor the tax in – am I to question a prospective tenant on what equipment he will have on my premises? What happens if we enter into a written long-term agreement for the rental rate and the value of his equipment is not as initially indicated before entering into a contract? These are all things that need to be considered.
Since Mr Howai intends to tax commercial properties based on the plant and equipment, then am I to assume that residential properties will be taxed based on the value of the items within the house? If this is so, then I will be taxed or penalised for improving my standard of living. I will be taxed because I choose to enjoy my hard-earned money by spending it on comfort and improving my home, things that I can pass on to my children and grandchildren. Is he telling me that I should instead spend my money at the bar, on the block or at the brothel where I will enjoy myself for a brief moment and have nothing to leave for my children? How is the next generation going to get a leg up on being able to enjoy a better standard of living if I am being punished for providing for them?
Pointing out the shortfalls does not solve the problem. What we need is a real workable and fair solution. Bring back the tax exactly as it was. This is the first step. No one should complain as they were paying this amount in the past – nothing new. In the case of commercial properties that are rented, make the tax a percentage of the rental value. Owner-occupied commercial properties can be based on a valuation price. Residential properties could be based on the selling price of the property when it changes hands; just the same way stamp duty is calculated.
The benefit of taxing residential properties in this way is the tax remains constant until the property is transferred. There is no cost to taxpayers hiring staff to carry out periodic valuations. Any improvement to my property is mine to enjoy until I sell the property. I have improved the potential tax revenue at no cost to the Government. I have already paid tax on my income: Why should I pay more because I choose to live in comfort?
In times of economic boom and properties are changing hands rapidly, the prices will rise and so will the tax. In times of a slump, property prices will drop and so will the tax. It regulates itself. It is determinable; no guessing, no surprises. I can factor it in when considering a mortgage without fear of an unknown increase.
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