|Valuation Surveyor: Iron out wrinkles in property tax |
Saturday, March 18 2017
THE property tax is a necessity but several issues in its application remain to be clarified, said valuation surveyor, Mark Farrell, of GA Farrell and Associates Ltd at a seminar at the Trinidad Hilton on Thursday held by the Bankers Association and KPMG.
He urged that property tax be based not on the rental value as proposed by the Government but on the capital value, the latter which he said is likely to be a more transparent figure for which evidence will exist such as in the form of a title deed. By contrast he said Trinidad has a tradition of secrecy surrounding the level of rents that are actually paid, as he recalled that sometimes even property- owners are reluctant to reveal their rents even to the valuators of their properties.
Mulling how conflicts would be resolved between contrasting valuations done by the State and by the individual property-owner, he said, “For the tax to be acceptable, you must have a proper appeal process.” He said that valuations of commercial properties should be based on their income earning level, but residential properties on their capital value, especially as homeowners may argue that they have no intention to rent therefore scotching the notion of a rental-value. Regarding commercial properties, he asked audience members if they’d prefer a property that can be rented for $10,000 per month in either the city or the country? When most people replied “city” he suggested the urban should therefore attract a higher property tax, reasoning, “So doesn’t that suggest the urban is worth more? Yet still both properties will pay the same tax.” He named countries with a property tax based on rental value as being the United Kingdom, but those with a capital basis being Denmark, US, Canada, St Lucia, Australia and Jamaica. The key he said is to take account of each countries circumstances, including market conditions and the system of property registration.
Questions from the audience usually dwelt on a mix of usages and/ or occupiers.
Asked what tax is liable if the people live upstairs and rent out downstairs to a business, Farrell said the tax would be computed asa combination of respectively residential and commercial. Residential is calculated at three percent of rentable value, and commercial is based on five percent of rentable value. For someone renting out an apartment complex to tenants, he reckoned the tax rate would be charged as commercial (as would be the case of a business park). While a landlord is responsible for paying the tax, past experience would suggest he’d try to pass on some off such an increase to his tenants. A building owner living on leased land - such as common in Woodbrook - will himself foot the tax, said Farrell.
KPMG director of tax, Gillian Wolffe-O’Neil earlier took participants through the basics of the property tax.