New tax package forces NHT to redo business plan
WITH FINANCE Minister Dr Peter Phillips last week announcing that the Government would be dipping into the coffers of the National Housing Trust for $11 billion over the next four years, the board of the Trust says "it is far too early to say definitively how the programmes of the Trust will change over the period."
The money, which will be provided by the NHT, is to be applied towards the Government's fiscal consolidation efforts as part of a deal with the International Monetary Fund.
"The management of the Trust is currently redoing its business plan to take into consideration its new reality," the Easton Douglas-led NHT board has said.
With the parliamentary Opposition questioning the legality of the raid on the NHT, the Douglas board said, "In making the commitment, the NHT is guided by the opinion of the solicitor general."
Below is a series of questions and answers submitted by the NHT as it relates to the support the Trust is providing to the Consolidated Fund.
Why has the NHT agreed to make the disbursement?
This contribution is being made in the national interest. NHT's funding is inextricably linked to the fundamentals of the economy. If the economy thrives, our inflows thrive. Likewise, if the economy stagnates, the NHT can expect degradation in its contribution inflows and mortgage repayments.
Had the NHT not been in a position to make this contribution, it could be that a larger tax package could have been required, thereby worsening the overall negative effect on our contributors. For example, you may not have been able to purchase homes, pay mortgages or possibly even to access the most basic of necessities. It is therefore incumbent on the NHT to share in the efforts to stabilise the Jamaican economy.
How is the $11-billion contribution being funded?
The contribution will be funded from a combination of accumulated surplus from operations, and surplus earned over the ensuing years. Importantly, it does not include employers' contributions to the Trust.
Is it legal for the NHT to make such a contribution?
The Trust is a statutory body and, as a consequence, falls within the definition of a public body under the Public Bodies Management and Accountability Act (PBMA). Under Section 4(5) of the PBMA Act, and in accordance with the Public Bodies Financial Distribution Regulations 2012, the minister of finance has the power to legally require the NHT to make a financial contribution in support of Government's fiscal initiatives.
If the NHT has these funds, why were they not being used to build more houses?
The amount of funds the Trust spends on housing each year depends on several factors, some of which are within NHT's control, others which are not. We note, however, that over the years, the Trust has consistently spent more in annual housing expenditure than it collects as contribution inflows. On average, over the six-year period ending 2011-2012, the NHT spent 17 per cent more than its net collections annually (contributions collected less contributions refunded), on housing expenditures. In 2011-2012, the Trust spent $24.3 billion on housing expenditures, which was 49 per cent above the net contributions of $16.3 billion collected that year.
We are on track to do the same this year. The funding for this level of expenditure has come from drawing down on our investment portfolio which has accumulated over the years.
How will the disbursement impact NHT's mandate?
The NHT's mandate will not change under this arrangement. The Trust will continue to play its part as a major player in the housing construction industry, but will focus its efforts on the lower-income earners and the improvements of community living conditions for our contributors. We will also seek to support initiatives which create jobs in the construction industry.
Will the NHT's business be able to survive this significant draw down of funds?
The Trust remains financially viable. We will continue to manage our business to ensure that there will be funding available to meet all our financial obligations, including the call on the Trust for contribution refunds to which our contributors are entitled.