Thu | Jan 17, 2019

Letter of the Day

Published:Tuesday | December 2, 2014 | 11:35 PM

Reduce NHT rate


The National Housing Trust (NHT) has found itself with a cash surplus that is seemingly a constant source temptation for the Government. The Government, over the years, has been tempted to 'invest' the surplus cash in businesses and ventures that are at best controversial, and given the constitutional purpose of the NHT, also illegal.

NHT deductions are mandated by law, and once employed, we have no choice but to 'contribute' to the fund and at the specified rate. The fact that there is a cash surplus means perhaps, among other things, the rate at which employees are contributing is too high, or the NHT is not using the contributions made by employees to provide sufficient affordable housing solutions for the contributors who dream of owning their own homes.

The Government could reduce the rate at which it currently charges employees and still benefit by way of revenue in terms of GCT. A reduced rate would mean more money being available to contributors to spend on even more goods and services. This would be a way of channelling the surplus cash away from the fund to the wider economy, and in a less controversial manner. In addition, the Government will then be able to do with GCT collection/revenue what it is not legally able to do with NHT contributions.

And what if a reduced rate inhibits the fund from providing adequate housing for contributors? Well, currently, it is estimated that the NHT only provides for 12 per cent of the country's housing inventory, according to Claude Clarke. This poor conversion rate of collecting contributions to provide housing for contributors, charging contributors at a rate that is evidently too high, along with what appears to be a lack of proper investment strategies (investing in the creation of affordable housing), are factors contributing to the cash surplus of the NHT.

With an election looming by 2016, reducing the NHT contribution rate is not only a pragmatic, sensible decision, but it is also a smart political one, which could give an advantage to the ruling party.

For the average person, however, who perhaps will never own a house through the NHT despite years of contribution, getting back some money in his pocket through a reduced rate would have much more meaning to him, as he could realise the real, present value of his money by having it to spend.

There would be increased consumption generally, from which the economy would benefit and the Government would still earn a revenue through GCT.