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Property owners to pay 15 per cent increase

Property owners to pay 15 per cent increase

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Property owners will be expected to shell out a 15 per cent increase as government announced its intention to replace the Annual Rental Value (ARV) system of property tax with a Market Value (MV) method.{{more}}

Prime Minister and Minister of Finance Dr Ralph Gonsalves made the announcement Monday, January 9, as he delivered the 2012 Budget address in the House.

According to Gonsalves, the rental values are administratively difficult to determine, especially in areas where almost all the properties are owner occupied.

“This creates two major problems: (1) it makes tax payments unrelated to the market values of property with undesired effects on the distribution of the tax burden and (2) it generates the perception that the tax is unfair,” he explained.

The new Market Value property list includes some 40, 851 properties, together with an additional 15,796 built structures and buildings with a combined open market valuation of $9.046 billion, compared to the existing Annual Rental Value list of some 25,940 properties with a total annual rental value of $71 million and an ARV tax assessment of $3.6 million.

“The existing ARV data have been analyzed with the new MV data in order to establish a correlation to guide tax rates,” the prime minister explained, adding that the new tax regime has been effected through the use of a formula MV = 73 x ARV.

He noted that the valuation method to produce the list did not determine the tax assessed, but the rate applied to the list will do so.

“We therefore propose to levy the new property tax at a rate of 0.8 per cent of the market value which will cause a modest 15 per cent increase in the tax paid by the average tax-payers,” Gonsalves said during his address.

He contended that this increase was “reasonable,” considering the fact that the present valuation list has been in existence since the 1990s.

“The overall revenue impact will, however, be much greater, and fairer, since we will now be capturing an additional 10,000 taxpayers and since we are putting systems in place to enforce compliance and reduce delinquency,” Gonsalves explained.

The additional revenue to be realized from this, according to Gonsalves, was estimated at $3.2 million per annum.

And although all property owners would be registered, Gonsalves said that it was the government’s intention to exempt those who own properties with an assessed value less than $25,000 from the payment of the tax, which was expected to exempt close to 10,000 property owners.

Transitional relief will be offered to individuals whose property tax will increase by more than 25 per cent and the assessment will be reduced where there are particular grounds to suggest that the market value is incorrect and has not been calculated on a proper basis, according to Gonsalves.

He said that concessionary rates will be offered on certain categories of property, such as new commercial properties, hotels and other tourism related properties and another feature was the banding of properties within various bands for the purpose of establishing property tax.

“The agreed rates will apply to the mid-point of each band to provide the same tax for all property owners within the band,” the prime minister explained.

The valuation list for the various districts will be published and made available to the general public for inspection and those property owners who are aggrieved with the valuation placed on their property will have the right to appeal to a valuation tribunal established by the government.

The list and procedures for appeal will be made available to the public no later than February 28, 2012.(DD)

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