Property tax – what's the point?

In any economy taxes are important. They are critical revenue streams that allow a government to attend to the needs of the people and the business of the country.

Taxation goes back millennia, to the Greek and Romans, and probably further back still, and with time has become extremely sophisticated.

Property tax is just one source of direct taxation which spread throughout Europe, the Levant, Asia and eventually all over the world. What makes it interesting is the fact that even back in Roman times property tax was controversial.

All taxation is disputable, because taxes make up a large part of the national income, and although they mostly go on social and economic welfare, tax policy is political and, as we have seen with property tax, is used in the pursuit of political power.

Whether taxes are fair or unfair depends on who you are, what you own, how much of it, and which party you vote for, but generally we all buy into the principle that citizens should support the state by contributing financially according to our ability, that the taxes should not be arbitrary, but fixed, that the dates and methods of payment should be clear, easy to understand and to comply with, and that since taxes are not a penalty but the exercise of the good citizen, they should also be convenient to the taxpayer.

Bearing that in mind, it is worth considering if the TT property tax, as it exists (or maybe that is not the right verb), is a fair tax.

What is the objective of the property tax?

In most countries, this sort of taxation is a means of raising revenue for the local council or authority in order to service the needs of local taxpayers, not to add to the national treasury, which is where I assume ours goes.

Here in TT, where the taxation regime is extremely lax and billions of owed taxes remain unpaid and probably unrecoverable, you cannot blame the average citizen for feeling that their money will end up in a big black hole, while the road or bridge to their property is unpassable, there is a shortage of local amenities, under-resourced support services, inadequate supplies of water etc, etc.

In the UK, where I lived for many years and paid probably tens of thousands of pounds to local governments, because few escape it, property tax is known as council tax. It is a tax paid by the person or family residing in a property, not just owners, aged over 18.

Therefore the reach is much wider, although there are exemptions and discounts, depending on whether the property is owned by a charity, for example, or is unoccupied, or occupied by disabled, under-aged or single dwellers.

Unlike TT, where rental rates are the basis for establishing what our individual tax rate is for the property we own, which is arbitrary, in the UK there are fixed rate bands based on the value of all the local houses on a certain date. It used to be April 1, 1991, which may have changed.

The local authority holds that list, so there is no argument about the value of the property, as a public record exists. The UK gave up on rental-based assessment some time ago, but a future government could well change the system.

There are different types of local authority, depending on its size, but each local authority or council receives a subsidy from the central government, on average about a third of its annual budget, and then raises other revenue from taxes on residential property, and also from business premises, a percentage of which is claimed by the central government.

This is another significant difference between the two systems. TT is small, and local government has very few powers, but a system that would allow property taxes to remain in the community and work for the people would not feel so "advantageous." It would also be a means of achieving higher-quality local public services and allowing our corporations to build sustainable and inclusive local communities.

Ours is a highly centralised economy and that battle may already be lost, but it’s worth pointing out that in UK council areas, the parks and roadways are constantly maintained – none of the break-axle, lose-life potholes that are everywhere here – local leisure and sport centres exist as well as facilities for children, the differently-abled and economically challenged, public transport is geared to local needs, and a host of other social services are offered.

Importantly, the council is answerable to local taxpayers for building regulations – so no houses going up one foot from your bedroom window and with no drainage in the plan; no depriving any householder of the loss of aspect, privacy or light or spoiling anyone’s enjoyment of their home either.

In TT there is a paucity of taxes that redistribute wealth, except for the property tax, which is really a wealth tax, since only owners pay, not tenants or non-owner residents. Capital gains tax and Inheritance tax would yield some valuable income too.

I wonder why TT governments have been shy about those?