Some business leaders feel that the recently announced change in the ceiling for property tax and its accompanying change in date of valuation could spell disaster for those whose property could now be assessed at 2011 values rather than those of 1991.
During his reading of the budget speech almost two weeks ago, Minister of Finance Dr Ashni Singh said that with effect from year of assessment 2014, individuals will be charged zero per cent for the first $40 million of net property and 0.75 per cent for the remainder of net property.
“In other words, whereas the current tax free threshold for property tax on individuals is $7.5 million, the new threshold will be $40 million, as a result of which tens of thousands of low and middle income earners with net property below $40 million will no longer be subject to property tax,” the minister had announced on budget day.
“As with companies, the valuation date for the purposes of the property tax will be revised from January 1, 1991 to January 1, 2011,” the minister said in his speech.
Speaking to this newspaper, former chairman of the Private Sector Commission Ramesh Dookhoo said one should be slow to celebrate the announcement in the national budget of the lifting of the ceiling for property tax since it may have a backlash for some persons.
“I was not too anxious to celebrate yet [because] the valuation of your fixed assets will be higher,” he said. “How we arrived at the 2011 valuation is still unclear to me but it means it will be higher. We have to see how the implementation takes place,” he said.
He is of the view that taxes will go up for some categories of taxpayers and he believes it will be the rationalisation of the tax. “Is the government going to ask for a revaluation of your assets?” he asked.
Dookhoo believes that the changes could only be properly implemented if there is an element to ensure that there is full compliance with the law regarding the payment of such taxes.
In a comment to this newspaper, President of the Georgetown Chamber of Commerce and Industry (GCCI) Clinton Urling said the decision to raise the taxable threshold on property taxes to 10 million and above “is a most welcomed initiative.
“The previous non-taxable threshold of $1.5 million was inadequate. Property acquisition and ownership [are] a vital part of the world of commerce and business. This higher threshold acknowledges that the value for most property today greatly exceeds the $1.5 million figure,” he said.
Urling noted that the measure to assess valuation based on 2011 values as opposed to 1991 “is an obvious and necessary one [since] inflation and the changing economic landscape from them to now necessitate such a move.”
“The implication of this on businesses would be mostly positive, [resulting in them paying fewer taxes] since most business already use current valuations to assess taxes dues and to access finance,” he said, noting that this gives an additional $8.5 million of tax relief.
“The updated valuation measure would help government to also close in on the gap of revenue that would be lost as a result of the threshold increase. In fact, there is a strong possibility that it results in a revenue neutral or positive position for the state as a result of higher valuations,” he said.
Speaking to this newspaper, Chairman of the Private Sector Commission Ron Webster said that there is a danger in going to the extreme but hopefully it would not turn out to have a negative impact.
Commenting on the announcement, Webster said that invariably, valuation of assets has increased by virtue of inflation. He said the tax is going to be higher for larger property owners and those with large land holdings. “We should be in a position to issue a statement in a week… We are looking at examples to [ascertain the possible impacts],” he said. “If it ends up causing higher taxes then we are back to square one,” he said. “But [I believe] small companies will be better off,” he said.