Increasing property tax is long overdue, but implementing it during this period of economic decline can lead to social unrest, chartered surveyor Afra Raymond is warning. Raymond, managing director of Raymond & Pierre, Ltd, recalled that the last time the population was taxed in such a time, there was an attempted takeover of the government.
"During the National Alliance for Reconstruction regime in the late 1980s, the government introduced Value Added Tax (Vat). "There was a bloody coup d'etat in 1990." Noting that dealing in property was a main engine of wealth among some of T&T's citizens, Raymond said the most wealthy people didn't have to pay taxes on their properties.
"A property tax system will raise a fair amount of money for the Government, but it should be done during a time of economic prosperity. "To implement it now is poor timing," the Port-of-Spain surveyor said. "Taxes are being brought at a time of economic hardship, social dislocation, income decline. "This could end up in social unrest. It is fundamentally unwise to introduce a new tax in a time of economic hardship." He said those with fixed incomes, like pensioners, and lower incomes may suffer genuine hardship, and provision should be made for them.
No more free rides
Every single property in T&T will be taxed, but the surveyor said he was "quite sure" the State will not do an individual valuation of every property, because "that's impossible. "I believe they will do mass valuations, which means they will do an average valuation for different areas."For instance, all houses in Trincity may have a monthly rental value of $3,000 and a yearly value of $36,000.
"The yearly tax on this will be $1,080 and the monthly, $90." Raymond said if one of the houses in this area had termites and a leaking roof, there should be some system in place for the owner to request a new valuation.
He said during the last 50 to 60 years, property owners in T&T had a free ride, as far as property ownership was concerned, because the person who bought or sold land was lightly-taxed. "Under the present system, Government makes between $120 million and $130 million annually from taxing properties in the whole country. "It's a good thing to maintain an up-to-date system of taxation, but it can get chewed up because of wrong timing," Raymond said.
How taxes work out
Raymond gave some examples of how residential and commercial properties may be taxed. "Government assesses the monthly rental value of your property and works out the annual rental value, and then taxes you on that. "A typical three-bedroom house in Woodbrook, for instance, has a monthly rental value of $5,000 and an annual value of $60,000.
"The owners previously (before new tax system) paid land and building taxes or house taxes of $48 a year. "Under the new system, their taxes will work out to be three per cent of the annual rental value, which is three per cent of $60,000. "This works out to be $1,800 a year and $150 monthly." Noting that this really is "not quite high," Raymond gave another example of the taxes that will have to be paid on a "small office overlooking a leafy square" in Port-of-Spain.
The property is worth $2 million and the owners pay land and building taxes of $720 annually, he said.
"There is a main office downstairs and a kitchen and bathrooms.
"On the first floor there is the same thing, with two private and general offices. "The monthly rental value of this property is $25,000, which works out to $300,000 yearly. "The owners will have to pay a five per cent tax of the annual rental value of $300,000. "This works out to be $15,000 yearly and $1,250 monthly." Raymond was unable to give an example of taxes that will have to be paid on agricultural lands. "There is a challenge in working out the rental value of agricultural lands, because there is no organised market in the rental of lands."
