|Some comments on the property and
construction proposals of Budget 2011
Published Thursday September 23rd, 2010
This was the inaugural budget for
both the newly-elected People's Partnership and its Finance Minister,
The burning question for me in
preparing these comments was the big one – 'Is the Honeymoon over?'.
In my view, the honeymoon for this
new government will last about 6 months, given the sheer scale of the
mess they have inherited.
There were real expectations aroused
in the recent election campaign and the reduced revenues available to
the State would have made the budget into a balancing-act, particularly
when one considers the repeated promises of 'No New Taxes'.
The main items on the property and
construction aspects were –
The Property Tax was 'Axed' as
promised - “...The
Property Tax will be replaced by the old Lands and Building Taxes regime
at the old rates and old values.
There will be a waiver of lands
and buildings tax for the year 2010...”
There has been a misleading rebuttal
on this from the Opposition Leader, Dr. Keith Rowley, in that the 2011
Estimates of Revenue tell us that the Land & Building Taxes are
expected to increase from $71.4M to $173.8M. Rowley's statement would
lead one to think that the property tax take would be of the order of
$300M, due to the omission of the municipalities.
In fact, that is not the case, since
the revenue of the five municipalities (POS, San Fernando, Arima,
Chaguanas and Point Fortin) are found in the Estimates of Revenue for
Statutory Boards and Similar Bodies etc. Due to the fact that one of
the effects of the controversial property tax was to relieve these
municipalities of their powers to tax property, the 2011 estimates of
revenue need to be properly interpreted. The municipalities are
estimated to raise revenue of nil in 2011, since all their revenue – as
well as that of the regional corporations – is collected by the Counties
and transmitted to the Central Government.
The true picture is that $142.52M was
the estimate of revenue from property taxes in 2009 – that is the
combined figure for House Rates, paid in municipalities, and Land &
Building taxes paid elsewhere. We are therefore anticipating an
increase in revenue from this source of the order of 18%.
No rationale was given for the waiver
of property taxes for 2010, which was an astonishing decision, given the
background against which the budget was drawn up.
Before I leave the property tax
topic, it is interesting to consider that rental income is also subject
to income tax. Not many people who own rental property actually pay
income tax on that rental income – if you don't believe me, just ask a
few friends or relatives who own rental property. This seems to me to
be an area in which the Finance Minister can easily collect the data and
increase the State's revenue by staying within the 'No New Taxes'
promise and implementing the laws which are already on the books. But
more on that in a later article.
The Minister of Finance made strong
statements in support of home ownership, he also outlined what appears
to be a merger between several State-controlled mortgage companies. No
target numbers of new homes to be built were given.
The Housing and Environment Minister,
Dr. Roodal Moonilal, recently announced that the Housing Development
Corporation's (HDC) new output target is 6,000 new homes in 2011.
The Housing and Environment Ministry
have zero allocation of capital funding according to the 2011 Estimates
of Expenditure. There is an allocation of $845M to the Hosuing and
Settlements programme shown in the Public Sector Investment Program (PSIP).
Those estimates should cross-reference with each other and the fact that
they do not is cause for concern, to say the least.
This is the pattern of State spending
on new homes, derived from the capital allocations only -
Housing Ministry Capital Allocation ($M)
There was also the revival of an
annual tax credit of $18,000 per household for first-time owners for the
first five years. That measure is expected to cost $20M, which implies
that just over 1,100 households will benefit from this provision. TO
quote - “...This
measure will generate significant investment in the private sector
Given the quantity of unsold, privately-built homes and the volume of
HDC units soon to be released onto the market, it seems quite
unrealistic to expect that this measure could yield 'significant
What is of greater concern to me is
the question of whether we are at the limits of possibility as to
home-ownership levels. 76% of our households now own their homes, the
comparative figure for the USA is 69% and for the UK it is 68%. How
realistic is it to keep pushing for increasing home-ownership?
The HDC's low-cost 'Accelerated
Housing Program' stalled, with over 10,000 empty homes as proof, due to
a shortage of applicants who could qualify for a mortgage.
The Minister of Finance spoke of the
neglect with which our organisational and institutional infrastructure
had been treated and I could not agree more. On this count, there needs
to be proper consideration given to the resuscitation of the Rent
Control Boards. Also, the HDC needs to start giving some of those empty
homes to people who just want to rent.
Special Purpose Entities (SPEs) –
What is their future in this new dispensation?
“Mr. Speaker, no coherent, co-ordinated
planning or strategy for state enterprises exists. As a result we have
begun to rationalize the state enterprises, including the special
purpose companies, which will incorporate a new accountability system
that goes beyond the presently operating company ordinances. It is these
loopholes in public accountability that resulted in the UDeCOTT scandal.
This must never again happen in Trinidad and Tobago.”
Now that this just not so since there
is a Performance Monitoring Guide of State Enterprises, published by the
Investments Division of the Ministry of Finance in 2008.
This issue, as always in our country,
is one of implementation. The provisions of that guide are not being
followed and the wrongdoers are not being called to order.
The issue for us is to prevent the
recurrence of that pattern of mismanagement and disorder in public
affairs. That can only happen if we enforce the present guidelines and
In the next column, I will discuss
the attempt to map out a new philosophy in this budget and the CL
Afra Raymond is Managing Director of
Raymond & Pierre Limited and President of the Institute of Surveyors of
Trinidad & Tobago. Comments can be sent to