Sophia Frazer Binns | Property tax hike untenable
It is accepted that taxes are what citizens pay for the activities of their governments in order to ensure the effective management of communities.
We accept that as a country, our property tax compliance is not where it ought to be. However, while this continues to be a problem, the answer cannot be to increase property tax to raise revenues when arrears amount to nearly $14 billion.
The recent hike in property tax raises several questions and concerns. We already know that the Government is owed $13.8 billion in property tax and is now seeking to raise an additional $4 billion in revenue by way of an increase. One would imagine that the common-sense approach would be for the Government to increase its collection and compliance efforts rather than embark on this unjustified increase that would undoubtedly negatively impact property owners.
In addition, given the compliance rate of just over 51 per cent, another question to be asked is, if persons are unable to pay their taxes at the lower value, how are they going to pay at the increased value?
The July 2016 IMF Technical Assistance Report noted that "compensating for revenue loss by increasing the tax rate would further increase inequities, reduce transparency, and discourage compliance ...". I believe the Holness administration, and certainly, Finance Minister Audley Shaw would have been aware of this.
While about 272,000 persons will enjoy a reduction in their tax payment, most of us will be forced to find, at minimum,
double what was paid for the year 2016-2017. Of the more than 800,000 persons on the tax roll, over 600,000 persons will be asked to find additional monies to pay. The Government has sought to give the impression that persons will generally benefit from the reduction in the percentage payable. However, this is a myth cloaked in untruthfulness.
The fact is that two per cent of $1,000,000 is less than 1.3 per cent of 2,000,000. Therefore, when the minister of finance seeks to convey that persons will pay less because of the reduced percentage, he is attempting to obfuscate the issue.
It is of note "that although
the revaluation exercise was completed in 2013, the revised values have not been used
hitherto, due largely to the disproportionate increases in land values". It is my belief that the PNP government of the day decided not to implement the revised valuation as it would have been burdensome on Jamaicans, especially in light of the taxes they were already being asked to pay coupled with its disproportionality.
Yet, the JLP Government in December 2016 gave approval for the use of the 2013 valuation.
Examples of such disproportionality in property increase are as follows:
Property location Property tax payment 2016 Property tax payment 2017
Constant Spring, St Andrew $18,000 $34,000
Charlton, St Andrew $7,000 $15,000
Wellington Heights, St Andrew $24,000 $101,000
Hartlands, St Catherine $7,000 $18,000
Mandeville, Manchester $162,500 $466,400
Parts of Clarendon $40,000 $187,000
Hanover $2,650 19,150
St Elizabeth $18,500 $23,000
In terms of property value, a property on Lady Musgrave Road in St Andrew has increased to $7m from $1.5m. Similarly, property value in St Ann has increased from $2.3m to $7m and another from $3.65m to $11m, with taxes moving from $67,500 to $112,900.
Information available shows the approximate percentage increase in property value by parishes as follows:
• Mandeville : 1,751%
• St Catherine : 359%
• St Ann : 698%
• Portland : 320%
• St James : 419%
• St Andrew : 295%
• Hanover : 611%
• Westmoreland : 618%
• Trelawny : 397%
• Kingston : 170%
These increases are not only disproportionate, but are unconscionable and will affect the fixed-income earner, the young professional just starting life, teachers, police, nurses and many others whose income are typically low.
These increases will also affect a person's ability to buy or sell land and has the distinct possibility of reducing Jamaica to a squatter society rather than an ownership society, as many persons will be unable to purchase property.
Its effect is to stymie the real estate market, as on the one hand, persons will be forced to sell because of their inability to pay the increased tax, while on the other hand, others will be unable to buy because of the increased cost of property.
The Government must, therefore, in the interest of all Jamaicans, reconsider this
imposition, and instead of increasing property tax , consider the following options:
i. Grant a period of amnesty to delinquent persons, as well as the waiver of all interests or penalties that may accrue.
ii. Simplify the procedures for persons to get their names on the tax roll, particularly as it relates to unregistered land. This would allow persons to pay taxes for the portion they occupy rather than the larger parcel of land that they do not own or possess.
iii. Undertake more frequent property revaluation to prevent these massive increases.
iv. Comprehensive strategies to increase compliance
These recommendations will be far-reaching and reap positive rewards.
At the same time, it remains unknown the factors that were considered in making these new valuations. I, therefore, call on the minister of finance to make the 2013 report public. Said report should be tabled in the Parliament to facilitate robust discussion.
In the final analysis, it will be useful for Minister Shaw and the prime minister to recall the words of Winston Churchill: "... For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
- Senator Sophia Frazer Binns is opposition spokesperson on land and environment. Email feedback to firstname.lastname@example.org.