If and when the People’s Partnership Government implements property tax it is likely to lead to a political fallout. Also, the Government’s credibility would slip another notch, and it can put another nail in the party’s coffin. So said a political analyst and two economists on the issue of the Government’s plans to bring back the tax.
In a July 14 Sunday Guardian article, Finance Minister Larry Howai indicated that the Government had lost $600 million in the non-collection of property tax over the last three years and was considering bringing back the tax—if not in this year’s budget, some time after. The delay in the tax collection was caused when the People’s National Movement (PNM) brought legislation under the Property Tax Act of 2009 that would have essentially provided new rates upon which properties would have been taxed.
The legislation was passed in December 2009. This prompted former deputy leader of the Congress of the People Prakash Ramadhar to launch an “Axe the Tax” campaign. The PP Government also promised to rescind the tax in its 2010 manifesto.
Wilson: There will be political fallout
Former finance minister and economist Selby Wilson said if the Government should follow through with its plans, “there will be political fallout.” Wilson said the fallout can result in citizens changing their political allegiance. He agreed that property tax should return. “If the Government does not introduce the tax, a subsequent government will.” Wilson said careful consideration must be made on how the tax should be introduced and its justification.
Wilson said it was left to be seen if the tax would be introduced in a different form, as opposed to what the PNM had intended. He said the re-implementation of the tax should not come as a total shock. “Whatever that is done people have to feel they are fairly treated and the tax is not disproportionately distributed between the haves and have nots.”
King: A practical tax needed
Economist and former minister of planning, restructuring and gender affairs Mary King did not see the PP suffering politically if the tax is returned. “Why should Government suffer for increasing taxes? People have not been paying for three years. They were paying at very low rates before 2009.” King said the Government lives by its taxes, stating that utilities, garbage collection, gas and electricity are already subsidised by the State.
“When you look at the Gross Domestic Product and the budget, you will see that 47 per cent of all your expenditure of Government goes to transfers and subsidies. Now, why do we have this situation? Therefore, we have to correct it.” King said of the $600 million the Government had lost in revenue, we need to come up with a proper policy and have people pay their taxes.
King said while the PNM had intended to have houses and buildings revalued under a new property tax, this was stopped by the Government, which really was a wrong move. I think we should have been trying to bring the prices down a little bit from the PNM’s status at that time and come back with a practical tax that would not make the poor people suffer.
“That was the real issue, that people who had low cost housing and who could really not afford it...the increase, would suffer greatly. Those are the things we have to look at.”
Watson: Politics and economics may clash
Professor of economics Patrick Watson said while the move to implement the tax was clearly wise, “we don’t know how wise it will be politically.” In some instances, Watson said, politics and economics “may clash”. Asked if the implementation could hurt the PP politically, Watson replied, “It probably will because people will use it against them like the PNM, for instance.” Watson said many people had indicated that they were willing to pay taxes. He agreed the tax should return in a just, reasonable and equitable manner.
Watson said citizens fought against the tax because they felt money was flowing freely while the PNM was wasting it. Having suffered repeated deficit budgets, Watson said the collection of property tax was one of the ways to raise much needed revenue. Watson said while people fought against the PNM’s version of the tax “The understanding that we had at the time...that this is a tax that should be abolished once and for all. That was never the case. I will certainly not be part of any activity now to ban the tax.”
Watson said he was not sure why there was a moratorium on land and building taxes. If the tax in re-introduced, Watson said the Government would have to explain what was meant by repealing the tax.
Political analyst: A big nail in the PP’s coffin
Political analyst Dr Winford James said bringing back the tax will no doubt create credibility issues for the PP. “They now have to embrace an initiative they attacked. This must hurt their credibility.” James said it was clear that Government was clueless with managing the country’s affairs, and implementing the tax could be “a big, big nail in the coffin for them.”
James said while the PP might say that they are re-introducing the tax with some adjustments, one has to wait and see. He said they had to bring back a tax that was fair and equitable. Even if the PP introduce the tax at a lower rate, James said they will face problems.
“It will not go down well with the people. People will use some of the arguments they presented in the first place.”
As it stands, James said the PP’s credibility continues to slide. “They are plummeting and they will have to go back on what they heavily criticised, which would suggest they do not have new and different ideas.” James said the ramifications they could face was a depletion of votes and people’s loyalty to the party being switched. “While their decision might be brave, the Government could face a political backlash.”