Property tax fears - Shaw wary of rate increases as Gov't plans two-year land-value reviews
Published:Wednesday | February 26, 2014 | 12:00 AM
Daraine Luton, Senior Staff Reporter
PROPERTY TAX compliance has increased by roughly 30 per cent in the last year, the Government has revealed, even as it announced plans to have more regular reviews of property valuations, which could lead to continuing increases in rates.
Parliament's committee on taxation yesterday signed off on proposals for interim adjustments in property values to take place at the halfway stage of regular five-year valuations.
But one committee member, Audley Shaw, protested, saying the interim adjustments to value would give a fiat to the tax authorities to impose property-tax increases overnight.
The tax blueprint, which outlines how the Government intends to proceed with tax reform, indicates that there are to be amendments to the Land Valuation Act to allow for the adjustments in property value, which would take into account inflation.
"I am not comfortable with this, especially in circumstances where people's incomes are virtually static. Public-sector incomes are frozen, but all these costs everywhere - for food and everything - must go up, and now the land value man can be given a key card every two years to slap on another 10 or 20 per cent," Shaw fumed.
NOT AUTOMATIC
But Devon Rowe, the financial secretary, said the increase in the value of properties would not automatically mean an increase in property taxes. He, however, said it was necessary to keep track of the movement of property values so that property taxes could be more accurately calibrated.
Rowe also said that where there are increases in the cost of providing services such as street lighting and garbage collection, which are paid for by property taxes, decisions might have to be taken to increase property taxes.
"Land valuation could be moving, but if the cost of the service is not moving, there might not necessarily be an immediate need to increase the property taxes. But it is always important that we have current as possible valuation because when we wait until many years have passed before we do the valuation, it creates a shock to the taxpayer and to the system. Whereas, if we were adjusting incrementally over time, that adjustment could have been more easily absorbed every five or 10 years," Rowe said.
The normal land-valuation cycle is every five years. The committee, which is chaired by Finance Minister Dr Peter Phillips, urged the land valuation authority to observe the five-year valuation cycle, while at the same time, undertake a review at the midpoint, whether or not interim adjustments are contemplated.
USING UNIMPROVED RATES
In the meantime, the Government appears set to continue with the system of charging property tax on the unimproved value of properties.
Eric Allen, commissioner of land valuation, said moving to a system of charging property taxes on the improved value would use up a lot of time and resources.
He said property tax was currently charged based on location.
Phillips said while applying property taxes based on the improved value would be more effective in getting the wealthier to pay more, it would require the authorities to examine "every single parcel, and you have to arrive at a valuation of building and other accoutrement and other improvements that have been made".
The minister said the reasoning behind applying taxation on the unimproved value of properties is that it would provide an incentive for persons to do improvements to their properties. He further said that policymakers of the day felt that applying the tax on the improved value could send the signal to persons that they are being penalised for making improvements to their properties.