Loading...
ISTT Caribbean Land Conference 2019
Surveying best practice toward the sustainable development of Caribbean SIDS
October 10 & 11 - Hilton Trinidad & Conference Center

ISTT PROPERTY TAX UPDATE from Institute of Surveyors of Trinidad & Tobago's blog

After being dormant for several months, Property Tax is back on the heated discussion round table with the Government’s introduction of new legislative amendments. Earlier in March 2018, the Valuation of Land Amendment Bill and the Property Tax Amendment Bill were placed before Parliament and have since been passed. These bills made several noteworthy changes to the roll-out of Property Tax in Trinidad and Tobago; critical elements of which are discussed below.



Valuation of Land Act 2018 Amendment Bill:


Minimum Annual Rental Value (ARV).

A new minimum ARV is set at $18,000. This means that at the least, the tax on a residence would be $486 per annum (provided discretionary voids have been subtracted). The respective minimum tax for commercial property would be $810 per annum. It is not uncommon for a minimum tax to be stipulated as it is a feature of many property taxation systems. Otherwise, the revenue generated from properties that have a very low value may not even cover the costs of administering the assessments to those properties. Interestingly, this would become the highest minimum property tax in the Caribbean.



Declaration by Minister that valuation roll is in effect


The amendment states that once 50% of the valuation roll is complete, the Minister can declare that the roll is in effect. The implication of this is that once half of the country is assessed, property tax can be rolled out. What is unclear is what would happen to the properties that were not yet assessed. Would they be charged based on old rates? Would the assessments of neighbouring properties be interpolated to arrive at an ARV? Would they be charged based on minimum ARV? Or would these properties not be taxed at all until they are assessed? All of these options seem inequitable. Furthermore, if the first roll-out only applies to the 50% who were assessed, and those were the owners who diligently and dutifully filed the valuation return in 2017 (when many others did not), this could be viewed as the State punishing the citizens who actually complied with the law.



Valuation Tribunal


A Valuation Tribunal to replace the appeal responsibilities of the Tax Appeal Board for matters concerning the valuation of land is to be established. The composition of the Tribunal includes a chair who is an attorney at law with over 10 years’ experience, appointed by the President on the advice of the Judicial and Legal Services Commission; two persons who have qualifications and experience in Valuation and two other persons. The legislation is silent on how the President would appoint the valuation members of the Tribunal. Much in the same way that the chair is appointed on the advice of the JLSC, the valuation members ought to be appointed on the advice of the Institute of Surveyors of Trinidad and Tobago (ISTT) which is the only professional institution responsible locally for the validation of valuation surveying qualifications and experience.



New Return form.


The bill introduces a new valuation return form for property owners to submit. This form is significantly longer than the previous one, but is more thorough and less ambiguous. The penalty for failing to file the return has increased from $500 to $5,000 which is more likely to dissuade property owners from neglecting to file the return. It is expected that when the State is ready for individual property owners to file the new return, the public would be duly notified.



Taxing Squatters


The definition of “owner” has been altered and can now facilitate the application of property tax to illegal occupants of land (squatters). This is, conceptually and practically, a bad idea. Despite the fact that paying the tax does not, in itself, create a legal entitlement to land, it would complicate an already contentious area of land disputes. Taxing a squatter on the basis of his/her occupation of a specific parcel of land is an acknowledgement by the state that that asset (the squatter’s interest) is assessable for the purposes of taxation and therefore legitimate. This would then create a new grey area in the formal/informal divide of property rights; and considering the constraints already faced in land administration, it would add a further layer of unwelcomed complexity. It should therefore be discouraged at all costs.



Property Tax Act 2018 Amendment Bill:

Townhouses, condominiums, apartments and single commercial units


The amendment brings these types of property under the definition of ‘land’ for the purposes of taxation. The reason for this amendment is that under the previous definition, multiple individual ownership of real estate on a single (communal) parcel of land was not clearly covered. Therefore, in an effort to capture these types of property in the taxation system, the definition of land had to be altered. This seems to be a quick fix to a conceptual matter that should have been addressed properly at the onset. The fact is that the new Property Tax legislation was designed to move away from the “land and building” concept of real estate toward a more accurate “Property” definition. Therefore, it would have been more logical to create a definition of “Property” that would encompas all real estate types instead of adding to the already overreaching definition of “land”.



Tax Waiver


The general waiver on property tax has been extended to December 2017. Reference should be made to section 17 of the Property Tax Act that requires a notice of assessment to be served by March 31st of the year that property tax become due. As this date has already passed for 2018, it is likely that the next assessment notice would have to include dues for 2019 and 2018 (retroactively).


On the point of specific waivers, statements have been made recently that certain property owners such as those who are disabled, retired, in receipt of public welfare grants or earning an income of less than $3,500 per month are entitled to a waiver. In so far as the legislation goes, this is incorrect. Instead, such persons may apply for a deferral under section 23 of the Property Tax Act. Deferrals operate in a similar manner to arrears on a utility bill. It adds up and must be paid off in total at some point. The initial deferral applies for two years and then the owner would have to apply for extensions if necessary. The only real relief provided by this is that the owner would not have to pay property tax right now and would not be charged interest. However, the tax accumulates as a debt and for the latest, would have to be settled when the property is disposed (transferred, inherited or sold).



Other Matters



Valuation considerations


There has been no official word on the methodology that would be utilised by the State to assess Annual Rental Value. The method that is generally used in the private sector is a direct rental comparable approach. In this method, the property to be assessed would be compared to other properties that are currently being rented on the market. Doing a direct comparable approach for every property in the country would no doubt be laborious. It is therefore anticipated that the State would employ a simpler method. Whereas Computer-Aided Mass Appraisals (CAMA) is the modern approach to valuation for taxation purposes, property in Trinidad and Tobago lack the level of homogeneity needed to make automated models like CAMA effective. A tier-based system that categorises property based on simple variables such as location, accommodation and size, with market-derived rental bands would be the ideal approach for this country. The key concern however, is the evidentiary basis of rental value. Unlike sales, most rental transactions are not registered. It is therefore unclear what would be the source of data used by the State to guide the methodology employed and whether that data source would stand to scrutiny if challenged. In a recent High Court Judgment (Antoine v McKenzie), expert testimony on rental value was disregarded due to the lack of comparable evidence.



Online property database


Statements made in 2009 and reiterated in 2018 made reference to an online database that would record all properties in the country, their assessment and tax liability; which would be accessible to the general public. This database is exceedingly important to allow for transparency and public confidence in the system. It is hoped that the State follows through on this promise.



Conclusion


In summary, the amendments are generally innocuous and have helped to add some much needed clarity. Notwithstanding this, one of the key concerns is the lack of public education campaigns. Site visits have already begun and there has been no press release from the Ministry of Finance advising home owners on what to expect when the assessors come to their home. An essential aspect of transparency and good governance is public education and access to information. This is severely lacking and has caused widespread speculation, fear mongering and the promulgation of inaccurate information. It is therefore imperative that the State makes a greater effort to educate the general public and utilise a variety of communication mediums to do so.



Sunil Lalloo, PhD, FRICS

President (Elect)

Institute of Surveyors of Trinidad and Tobago (ISTT)


Previous post     
     Next post
     Blog home

The Wall

No comments
You need to sign in to comment

Post

By Institute of Surveyors of Trinidad & Tobago
Added Jul 12 '18, 11:22AM

Tags

Rate

Your rate:
Total: (0 rates)

Archives