Sun | Sep 24, 2017

Powerful interest groups welcome property tax changes, PNP rejects revision

Published:Wednesday | April 12, 2017 | 4:00 AMJovan Johnson
Audley Shaw, minister of finance and public service
Audley Shaw (left), minister of finance and public service, chats with Prime Minister Andrew Holness before addressing the contentious property tax issue in Parliament yesterday.
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The powerful interest groups that led public calls for the Government to review the revised property tax regime implemented on April 1 are expressing satisfaction with the changes announced yesterday, which will see a fall in rates and the level of increases.

The Andrew Holness administration has been under pressure from the Jamaica Hotel and Tourist Association (JHTA), Jamaica Manufacturers' Association (JMA) and the Realtors' Association of Jamaica, along with farmers and fixed-income earners such as pensioners to re-examine the regime that saw increases, for some more than 1,000 per cent, in property tax.

Finance Minister Audley Shaw, who initially said there would be no rollback of any of the tax measures he announced on March 9, told the House of Representatives that the Government has heard the "cries" and "cannot ignore" them.

The adjustments now include a reduction in the property tax rates using eight bands, which will range from 0.5 per cent to 0.9 per cent of the land value. The rates announced in March were from 0.8 per cent to 1.3 per cent.

"With this change in the tax rates, 448,360, or 58 per cent, of the 776,487 properties will now see a reduction or no change in their property tax. This is a big increase from the 35.1 per cent who would have benefited based on the previously announced rates," Shaw said, adding that 61 per cent of all property owners will see an increase of "no more than 15 per cent" when compared with what they paid last year.

Pointing to a survey it did, the JMA had argued that variations under the previous system were questionable and that businesses needed time to adjust to rates being upgraded for the first time since 2002.

 

GREAT DEAL OF MATURITY

 

"I applaud the minister wholeheartedly for listening to the cry of the people and for actually practising good governance," said Metry Seaga, the JMA president. He argued that "if the consultations were done before, it would never have reached here" but that the administration should be commended for a "great deal of maturity".

Noting that some landowners will still see large hikes, Shaw said that 6,848 properties - less than one per cent of taxable properties with values over $20 million - will have to pay increases ranging from 201 per cent to 604 per cent. Most of those properties, he said, included hotels, industrial or agricultural lands.

Omar Robinson, the president of the JHTA, had instructed his members not to pay their property taxes in defiance of the March 9 announcement.

Reacting yesterday, he told The Gleaner that he will have to check with members for feedback. "It depends on the individual members and how much they're being asked to pay. But a reduction is welcome," said Robinson.

Under the April 1 regime, commercial properties were faced with an average increase of 137 per cent. With the adjustments, however, that will fall to 58 per cent, according to the finance minister, who said the public discussion must consider that the value of unimproved land in Jamaica in 2013 amounted to $1.9 trillion, or 130 per cent of Jamaica's gross domestic product (GDP). The value in 2002, he said, was $567 billion.

The Realtors' Association said it no longer expects real estate owners, in any significant way, to sell off their properties to cover the higher taxes.

"I would expect that people would react positively to the changes and that they would be in a better position to manage the new tax obligations. I would expect much less fallout and disruption in the marketplace," president Edwin Wint said.

He supported Seaga that had consultations been done before the initial announcement, public reaction may have been different.

 

Opposition wants new property tax regime sent to House's tax committee

 

The Opposition People's National Party is rejecting the new changes to the property tax regime announced by Finance Minister Audley Shaw yesterday. Peter Bunting, speaking on behalf of the opposition leader, said: "Regardless of whatever the minister (Shaw) wants to say, this whole raft of tax measures are helping to pay for this 1.5 [income tax relief]."

Addressing Parliament, he said the Opposition could not support the property tax regime and suggested it be sent to the House's Tax Committee.

The Opposition claims that it never implemented the 2013 valuation when in government because it was awaiting an evaluation. Bunting defended that assertion, saying it would have been "unfair, burdensome and oppressive" if his government had just applied the rates with the valuations.

Shaw confirmed that the Government will lose $2.1 billion from reducing the property tax rates, but expects to make up the shortfall through a ramped-up compliance drive. Government had projected $8.6 billion in revenue.

For people who paid the taxes under the April 1 regime, any overpayment will be refunded or could be credited to their taxes that will be due next year, he added.

The International Monetary Fund, with which Jamaica is pursuing economic reforms, has been pushing the Government to implement the new system to get rid of the current "distortive" one.

Approximately 43 per cent of property owners do not pay their taxes, which are used to fund garbage collection and street lighting.

jovan.johnson@gleanerjm.com

 

 

KEY PROPERTY TAX ANNOUNCEMENTS

 

 

- Government retains a flat $1,000 on all properties valued up to $400,000. This will benefit $110,303 persons.

- Under the new rates, average increase in taxes for residential properties will now be 10 per cent, down from the 60 per cent average increase announced in March.

- For commercial properties, the average increase will be 58 per cent, down from the 137 per cent increase announced in March.

- For agricultural properties, average increase is now 40 per cent, down from the 93 per cent increase announced in March.

- Government intends to institute timely revaluations and annual changes linked to inflation to ensure sudden and high increases not implemented.

- Government is still committed to provide assistance to those who are unable to pay or wish to object.