Viewpoint: Hadyn John Gadsby
The proposed introduction of the new property tax regime in 2017, if implemented efficiently and transparently, should be viewed in a positive light due to the possible long-term social and economic value it could create in Trinidad and Tobago. It heralds a potential paradigm shift that could allow the state’s fiscal policy to be utilised more effectively in order to facilitate significant economic development.
The former lands and buildings tax regime was notoriously antiquated and did not accurately reflect the importance of land ownership to the overall economic well-being of the country. The Property Tax Act of 2009 was enacted under a wave of controversy and was not implemented after it was passed in December 2009. Its proposed re-introduction will create a new opportunity for the state to manage economic affairs outside of the new tax revenues. Additionally, the government should seek to use the proposed property tax as a mechanism through which it can achieve effective, long-term structural changes in T&T.
Currently, there is very little difference from a fiscal perspective between lands that have been zoned for agricultural, residential, industrial or commercial purposes. This has resulted in haphazard and irregular spatial development in previous decades. It is expected that the new property tax regime will establish individual tax rates for the various categories of land outlined above, as well as provide guidance and data that will enable the state to determine what type of activity should be permitted and/or encouraged in a particular area. If utilised effectively, the implementation of the property tax could support the long-term goals in relation to the decentralisation and diversification of the economy, and do so in a manner that may allow for a more efficient and effective use of the country’s limited land resources. For example, property tax concessions could be granted to certain prioritised industries, or to facilitate the establishment of particular types of developments in specific, targeted areas of T&T.
The property tax regime also has long-term potential for changing the way the state views broader economic development. Many businessmen and real estate developers could testify to the difficulty of dealing with the various state agencies involved in the planning approval process. The reason for this is partly because the establishment or location of a new factory, office building or housing project makes no fiscal difference to the state. However, once the new property tax regime becomes established, these state agencies would become part of a process that would expand and improve the potential tax base. This new reality could make significant changes to the way these agencies relate to and interact with the public, business owners, real estate developers and new homeowners.
Another tremendous opportunity that could be created by the introduction of the proposed property tax, should the state choose to do so, would be the allocation of some or all of the revenue generated to the particular regional corporation in which it was collected. This would significantly ease the perennial problems associated with the allocation and distribution of such funds to these state institutions, which are critical to the effective delivery of many of the government goods and services used by the people of T&T.
Such a move, if effectively implemented, could demonstrate a paradigm shift that will empower regional, borough and city corporations away from their current dependence on the central government. It would usher in a new era of distribution and governance in T&T that will be based on the effective use of resources generated within a community for the benefit of that specific community.
It is long overdue for this key element of great fiscal importance to be addressed and implemented in an intelligent manner. While the direct effect will hopefully lead to increased revenue collection, it remains to be seen whether the state will be able to grasp the other opportunities afforded to it by the property tax.
Read More from OBG
