Wednesday, September 9 2009

Two distinct minuses of the 2009/2010 National Budget, which was presented on Monday, have been the imprecise proposal to “implement a new four-tiered property tax regime based on present market value of properties” and Government’s failure to announce plans for the introduction of a clearly needed Public Sector Contributory Pension Scheme.

It is unfortunate that the reference in the Budget Speech to property tax reform has been imprecise, specifically, as it is an issue that affects the growing number of Trinidad and Tobago homeowners, many of whom now feel that the property tax adjustment plan, which comes into effect on January 1, 2010, may send up their property taxes astronomically. We pose the question: When the Minister of Finance, Karen Nunez-Tesheira, spoke of Government’s intention to “implement a new four-tiered property tax regime based on present market values of properties, did she mean three percent of the market value or the annual taxable value?

We raise the point because while the Finance Minister spoke in somewhat vague terms on the proposed new tax regime being based on market values she, precisely, stated that “In the case of industrial properties the tax will be six percent of the installed cost of plant, machinery and associated buildings.” Had there been a mistake, then, in the wording of the Minister’s initial draft of the Budget Speech which stood uncorrected in the final draft and at time of delivery? Minister Nunez-Tesheira should indicate to Parliament if the error had been in the drafting or that the wording may have given rise to misinterpretation, and in the process ease the discomfort of many property owning citizens.

However, if it was not an error and the phrase “based on present market values of properties” was indeed the intent of Government then the publicly declared plan, if that is what it is would be clearly outrageous. Not only may many property owners whose retirement or earned incomes are relatively modest be in danger of losing their homes, but rents, where housing units are rented out, will rise uncomfortably. This, in turn, will drive up the cost of living.

On the other issue, had Government moved to introduce a Contributory Pension Scheme for public officers, including teachers, police officers and public servants and monthly paid workers of State Enterprises, for example, the Public Transport Service Corporation, the implementation would, in the medium term, effectively reduce the increasingly enormous amount of money Government pays out today in non-Contributory Public Sector pensions. We had hoped that in Monday’s National Budget Speech such a scheme would have been announced.

Government should seriously consider implementing a non Contributory Pension Plan in which all State monthly paid officers will have sums equal to a fixed percentage of their monthly incomes deducted.

Failure to do this will see Government (read taxpayers) saddled, indefinitely, with the paying out of pensions whose accumulated sums may one day be in excess of 33 1/3 percent of gross revenues, as a result of the steadily increasing life span of Trinidadians and Tobagonians as with citizens of many other nations, because of the several advances in medical science.

Nationals whose life expectancy would have been nudging 60 years a few decades ago, today, thanks to the discovery of penicillin, izoniazid, the Salk and Sabin vaccines, aureomycin, insulin and streptomycin which have been major contributory factors in the fight against tuberculosis, diabetes, polio, whooping cough, pneumonia, diptheria, typhoid and influenza have life spans in the middle 70s and above. Under the existing non Contributory Pension Plans Government is required to pay out pensions for greater periods to its retirees than before. Unfortunately, the 2009/2010 Budget failed to address this.