GEORGE ALLEYNE Wednesday, September 16 2009

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SAY CHEESE: Pupils of the Arima West Government Primary School pose for the camera at the opening of the new school at Arima Old Road, Arima, yesterda...

While there would be few perhaps who would with reason disagree with the principle of raising additional revenue through a reform of the property tax system, nonetheless, the proposal by Government to introduce it from January, 2010, and with it relatively huge increases in property tax rates, was unfortunate.

Trinidad and Tobago’s economic downturn, part of a wider international financial crisis, has seen the country fall victim to two consecutive quarters of negative growth, uncomfortable levels of employment reduction in the energy and energy related sectors, reduced incomes and the growing difficulty of many citizens to meet their mortgage and/or rent payments. For the Ministry of Finance to employ the argument, as it has done, that it is seeking to make the planned tax rates more equitable is to mock a concerned public.

In some instances and, admittedly, this is rare, the Annual Taxable Value (ATV) may be almost the equivalent of the construction cost of the house itself, depending on when the house was built. Despite what the Ministry of Finance and by extension the Government has advanced, any introduction of the revised property tax reform, as hinted, will impact not only negatively on the cost of living but on even the modest lifestyles of many lower and middle income families as well.

The property tax reform move by the Administration contrasts awkwardly with measures implemented by an earlier PNM Administration, in 1974, “to keep down increases in the cost of living”, measures which included a subsidy on gasolene, kerosene and gas/diesel oil.

It is a subsidy which in its 35 years of existence has had the greatest positive impact, domino reaction et al, on the nation’s cost of living and continues to do so. It should be remembered and understood that the petroleum products subsidy which was brought into operation in the first full year of the Organisation of Petroleum Exporting Countries’ (OPEC) instituted sharp increase in the price of crude on the international market.

The oil price rise which had seen a massive expansion of the overall revenues and foreign exchange earnings would, interestingly, provoke the comment by late Minister of Finance, George Chambers in his 1975 Budget Speech that: “The outstanding feature of world economic experience for 1974 has been the high and rising level of inflation.” While I am not advancing that the situation which exists today is the same as that of 1974, Mr Chambers clearly understood the 1974 problems and had sought to alleviate them. And I may add, that unlike today when the 2009/2010 Budget has, dismissively, bypassed the concerns of scores of thousands of retired public servants, Mr Chambers had the pensions of public service retirees increased, retroactively, to January 1, 1974 from a minimum rise of 15 percent to a maximum of 35 percent! But I have strayed.

It was Thomas Drummond, who in his oft quoted 1838 “Letter to the Landlords of Tipperary” would state: “Property has its duties as well as its rights.”

I had referred earlier to communications by the Ministry of Finance on property tax reform. The Finance Ministry adopted the Question and Answer approach. I quote one such Question and Answer. Question: “How much tax must I pay?” Answer: “Your tax is calculated based on a percentage (rate of tax) of the Annual Taxable Value (ATV) of your property (land building), ie. tax rate x ATV.”

While the ATV “is the annual rental income expected to be earned on such a property less 10 percent....” what strikes this columnist is that the procedure in determining the “rental income” may turn out to be arbitrary.

Will there be a take it or leave it approach employed in determining the expected annual rental value of properties which are owner-occupied? Or will the Ministry of Finance or the agency or agencies to which this responsibility is delegated take into account such factors as the levels of noise and/or traffic in neighbourhoods with popular bars, liming areas and casinos; properties located at the edge of squatter settlements or which are affected each rainy season by flood waters or are in areas with indifferent garbage collection and therefore prone to unhealthy garbage buildups?