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The Central role of Local Government reform

Published Thursday November 5th  2009 

This week I am drawing some conclusions on the property tax proposals, together with a presentation of the corrected data.

The first issue in my mind is the question of why this form of property tax has not been reviewed since Independence.  There have been several significant attempts to review the property tax regime, but those attempts were shelved by politicians under pressure from landed interests.  That is something we need to be alert for at this time.

A further point is that the legislation was revised in 1990 and we are being presented with a new set of legislation without any explanation as to what were its shortcomings.  We need to separate the cogent arguments in favour of a review of values from the presentation of new legislation without a rationale.  It does remind me of the Draft Constitution or Working Document.

Why run the risk of failing to persuade the public of a new scheme of laws, if all one is trying to do is re-value the properties?  In the absence of a rationale for new laws, it almost seems like a planned diversion.  Time alone will tell whether this crop of politicians have greater determination than those of the past.

The interesting thing for me is the manner in which the revenues are proposed to be treated and the thinking underlying that.  One of the most fertile things about this moment is how certain issues have come together in that we are hearing talk of local government reform, property tax reform, calls for improved local services and better quality representation.

There is tremendous opposition to this property tax review.  One can well understand the widespread concerns expressed about the poor quality services, lack of accountability, all with a general sense of decline.  These objections to unprecedented increases in property tax are being expressed at the same time as proposals for the long-awaited local government reform.

Readers need to understand the serious change which this new legislation represents.  Under the existing system, property taxes are payable to the relevant local authority.  The local authority budgets are funded from both Rates & Taxes and Central Government subvention.  At present, only a minor part of local government expenditure is locally-generated from the residents’ Rates & Taxes.

For example, in the Municipal Corporations the proportions are set out in this table.  -

 

In 2009, 82% of Municipal Corporations’ funding came from Central Government.  That is solid justification for the persistent complaints that local government is too heavily-dependent on central government money.  If these property tax proposals are implemented, all Rates & Taxes which are now paid to the local authorities will be payable direct to central government.  That will have the effect of making local government bodies 98% reliant on central government funding.  As far as I am concerned, that would be a major step backward, since it would effectively dilute the already-limited independence of local government.  Readers, this is at the very same time that various lofty ideals as to local government reform are being consulted on and discussed.  Soon for debate, I am sure.

The only serious way to proceed would be to allow the local authorities to collect the ‘new’ funds due from the property tax review.  That would have the effect of blowing a breath of fresh air through the local government system and maybe even improving the extent to which citizens support both reforms.

That approach of combining the reforms is one which might win broad support and open fresh possibilities for our governance.

The table showing the combined property tax income County Victoria and the City of San Fernando was omitted from last week’s column.  The table is here –

Year                County Victoria         San Fernando            Total

1999/2000                   6.37                             8.7                   15.07

2001                            5.64                             9.94                 15.58

2002                            5.56                             9.71                 15.27

2003                            5.96                             12.39               18.35

2004                            5.97                             13.66               19.63

2005                            10.01                           13.46               23.47

2006                            8.66                             10.87               19.53

2007                            6.49                             13.1                 19.59

2008                            7.11                             18.19               25.3

2009                            5.9                               16                    21.9

 

The national totals for this type of property tax has been compiled from two sources –

·      House Rates, which is paid in Municipal Corporations, as listed at the end of last week’s Property Matters, from the Estimates of Revenue and Expenditure for the Statutory Boards, Similar Authorities and the THA.

·      Land & Building Taxes, which is paid in the rest of the country, from the Estimates of Revenue.

Year

L&B Taxes ($M)

House Rates ($M)

TOTALS ($M)

 

1993

72.04

17.83

89.87

 

1994

109.38

22.78

132.16

 

1995

60.89

22.55

83.44

 

1996

58.64

28.81

87.45

 

1997

56.63

26.61

83.24

 

1998

55.78

25.49

81.27

 

1998/1999

61.56

31.56

93.12

 

1999/2000

63.9

35.48

99.38

 

2001

59.11

35.97

95.08

 

2002

94.08

35.57

129.65

 

2003

77.5

49.19

126.69

 

2004

85.54

59

144.54

 

2005

62.68

61.35

124.03

 

2006

64.35

55.91

120.26

 

2007

83.72

66.16

149.88

 

2008

83.77

66.16

149.93

 

2009

72.77

69.75

142.52

 

An explanation as to the dates – Up to the start of 1998, the country’s fiscal year-end for national accounting was 31st December.  There was a transition between 1998 and 2001, with periods to be read as follows ‘1998′ is 1st January to 30th September of that year: ‘1998/1999′ is 12 months ending 30th September 1999 and 1999/2000 being 12 months ending 30th September 2000.

 

Afra Raymond is a chartered surveyor and managing director of
Raymond & Pierre Ltd. afra@raymondandpierre.com.

Afra Raymond - Property Matters

In 2009, 82% of Municipal Corporations’ funding came from Central Government.  That is solid justification for the persistent complaints that local government is too heavily-dependent on central government money.  If these property tax proposals are implemented, all Rates & Taxes which are now paid to the local authorities will be payable direct to central government.  That will have the effect of making local government bodies 98% reliant on central government funding.  As far as I am concerned, that would be a major step backward, since it would effectively dilute the already-limited independence of local government.  Readers, this is at the very same time that various lofty ideals as to local government reform are being consulted on and discussed.  Soon for debate, I am sure.