Ministerial Statement delivered by Mia Amor Mottley, Q.C., M.P., Prime Minister and Minister of Finance, Economic Affairs and Investment during the 42nd Sitting of the House of Assembly June 18th, 2019.
Mr. Speaker Sir,
I rise to give a statement on a matter which has been raised by concerned citizens of Barbados over the course of the last few weeks. The increase of land tax rates for those properties valued above $450,000 has resulted in complaints from some.
Sir, in the 2019 Budget Speech, I announced that the Land Tax rate for properties valued between $450,000 to $850,000 would be increased from 0.45% to 0.7% and the rate on properties valued above $850,000 would be increased from 0.75% to 1%. For the avoidance of doubt, Sir, I refer to residential properties.
At the same time we indicated that the first $150 000 in value of a property will still not be taxed and there would be no increase in taxes for properties between $150,000 and $450,000.
What this means Sir, is that the Land Tax on all properties below $450,000 has NOT increased. In other words there is NO increase for 63 618 properties in Barbados – out of the total 81 932 residential properties in the island. For almost 64,000 properties there has been no increase in land tax.
It means, Sir, that the Land Tax on a property owned by most Barbadians (tens of thousands of Barbadians) has not increased. Mr. Speaker, the police constable, the postal worker, the School Meals worker, the teacher, the nurse, the Immigration officer, the port worker — and I could go on — have not seen an increase in his or her Land Tax.
However, Mr. Speaker the change in Land Tax rates does affect some Barbadians. The increases on residential properties have been on 17,314 residential properties.
Mr. Speaker, with the additional disposable income to be delivered through the reduction of income tax rates as of next month , and then again a further reduction in January next year, the owner of a home valued over $450,000 and with an income of about $75,000 as a salary will pay approximately $4,375 less in income tax in a full fiscal year.
It therefore means that for most property owners the decrease in Income Tax will be significantly larger than any increase in their Land Tax for persons owning a property valued at more than $450,000. The decrease in the amount of income tax being paid will be significantly more than what the Government is asking people to pay in land tax above that amount.
But still Mr. Speaker, there will be some taxpayers who require intervention for reasons that are peculiar.
In response to the change in Land Tax rates we have heard from those Barbadians hurting. Some have let their voices be heard and asked for a little bit of an ease with the payment of Land Tax.
Mr. Speaker Sir, this Government, my Government, has taken the time to listen to this cry and to act where we can.
In my 2019 Budget Speech, I asked that we as a nation stay the course.
We all knew it would not be easy, but my Government is determined that we share the burden fairly and that no group will be unduly affected by the measures which we are implementing.
Because of this Mr. Speaker, we have created a framework to make it easier on ordinary Barbadians to pay their Land Tax bills over a longer period of time. We will be facilitating payment in installments.
Payment in Installments
There has been an outcry, Mr. Speaker, about the early issue date of these bills and the comparatively shorter discount periods for taxpayers to take advantage of. That has not been the case Sir.
I wish to remind the public through you sir, that Land Tax payments are always due before March 31st in the financial year in which they are issued. For the avoidance of doubt, once you pay before March 31st 2020 you will not be subject to any penalty or interest. So you always have until March 31 to pay your bill, and this year is no different.
In other words, Sir, the due date has not been changed.
Previously, Land Tax bills were issued in September which would have given you a shorter period of time to pay your bills between September and March 31. We took the deliberate decision to be able to issue the bills at the end of May, to give you a full ten months to make you way to be able to pay your bill rather than being force to do so within that six-month period.
Previously, we acknowledge there were discounts of 10% and 5% if paid 30 and 60 days respectively after the date of the issuance of the bills. Given the challenging circumstances facing the country, we chose to offer only the 5% discount this year for early payment instead of the ten per cent. I think that we made that clear when I spoke to the country in the Budget, that only the 5% discount would be available for early payment this year.
Mr. Speaker, having consulted with the relevant persons, we have taken the decision to allow taxpayers to enter into an arrangement with the Barbados Revenue Authority which will allow you to pay your Land Tax in up to 4 installments. This arrangement, Mr. Speaker, will allow persons to better plan the payment of their taxes and allow Barbadians to pay their Land Tax over a longer period of time because hitherto you paid your land tax once and for all in whatever month you paid it. Similarly, it will also allow many to benefit from the increase in disposable income that will come from the significant income tax relief that will start from next month, and once that relief comes it will be able to help them pay what land tax is due and owing.
Mr. Speaker Sir, my Government has agreed to extend the discount to even more Barbadians by allowing them to retain the discount of 5% once they enter into the installment arrangement before July 26, next month. So that so long as the first payment starts before July 26th this year, you can use that opportunity to pay your land taxes in up to four equal installments from this year, going forward.
Mr. Speaker, although we must make difficult choices in adhering to the Barbados Economic Recovery and Transformation Plan, we must always listen to the public and there must always be room for empathy and compromise in our decisions.
Existing Rebates
Mr. Speaker, I would like to remind the public through you, Sir that there are several provisions currently in place for Land Tax rebates.
1) The Agricultural sector, 2) the Hotel sector and 3) Pensioners, all already receive rebates on the land tax calculated, as we have long recognized as a nation that these groups especially require that we treat specially to their unique needs.
Sir, the Agricultural sector has been recognized as one which would be distinctly disadvantaged by paying the full amount of land tax. Mr. Speaker Sir, farming more often than not requires substantial areas of land, whether this land is used for rearing or raising a few sheep or to plant some sweet potatoes, or bananas or yams. Hotels often hold significant property in the country. In recognition of this Sir, entities within this sector are given a 50% rebate. In the agricultural sector farmers registered with the Ministry of Agriculture are given a 50% rebate on their Land Tax Payments.
Mr. Speaker Sir, as it relates to land owners who are pensioners, we acknowledge that on a fixed income, pensioners may not be in a position to pay the full amount of the Land Tax.
For this reason Mr. Speaker, the Barbados Revenue Authority typically grants Pensioners a rebate of 60% of the amount of Land Tax that is due on the properties on which pensioners reside. There is, in spite of this 60% rebate, still available to that pensioner or anyone else for that matter, further relief upon a case being made to the Land Tax Relief Board which seeks to provide relief where there is undue hardship in the application of land tax to anyone in this country. So ay Barbadian can apply so long as they can make their case of undue hardship.
Accommodation for Persons owning Vacant Land valued at under $450 000
Mr. Speaker Sir, we want to go further. We acknowledge today that there may be some Barbadians, including pensioners who purchase property as an investment for their children or grandchildren. These persons, Mr. Speaker, are seeking to leave a legacy for their children and grandchildren. We as a Government, and more importantly as a political party, philosophically support this as we seek to enfranchise our citizens in the building of a property owning democracy.
We did not choose to inherit these circumstances, Mr Speaker, and therefore we recognize that for the burden to be shared fairly we can exclude not group or no class from the adjustment.
As a government and a political party, we believe that Barbadians who have worked tirelessly to build this country up, should be commended for their willingness to own property and to leave it as a platform of wealth for the next generation. It is no small thing, Mr. Speaker, to recognize the great contribution that can be made in the lives of the next generation of your children by purchasing such properties and providing them with a measure of financial security as they start their adult lives.
Therefore, Mr. Speaker, we have laid out a framework to treat to these cases. That is why Sir, that even in the original framework that we set out in the last Budget, we excluded properties under $450,000 in value, and we did so, excluding by extension almost 64,000 properties.
Mr. Speaker, Sir, what we did not do was to exclude or provide special insulation for vacant lands under $450,000 and today Sir, I annouce that anyone owning vacant property which is valued under $450,000 will NOW attract a 10% discount on the amount of Land Tax they will have to pay to the Barbados Revenue Authority. I want to repeat. Any person owning vacant property, which is valued under $450,000 will NOW attract a 10% discount on the amount of Land Tax charged by the Barbados Revenue Authority.
In the instance where a person has already paid their tax on these vacant lands and a credit exists, such credit will be applied the Barbados Revenue Authority to your next land tax bill.
This means that 95% of all vacant lots in this country will now attract this 10% discount. To put it another way, there will only 1,870 vacant lots that will not benefit from this 10% discount, with almost 35,000 lots benefiting from the 10% discount. In plain terms, the 10 per cent discount is unlikely to be available to primarily commercial vacant lots and we already know that companies have already received significant savings with the corporation tax relief that has been announced and thus can carry this increased burden without further discount being made available to them.
Mr. Speaker Sir, this provision will allow those thousands of Barbadians who own these vacant lots to receive a further ease, bearing in mind that almost 64 000 of the 81 000 properties were already excluded by this Government by never being brought in to any increase in their Land Tax regime when we announced the Budget in March of this year.
Mr. Speaker Sir, these accommodations have been deemed a necessary response to the voices of Barbadians crying out for help on the issue of Land Tax. Mr. Speaker, we are listening to Barbadians and Sir, where we have to make adjustments to prevent some Barbadians from being disadvantaged more than others we will do so.
It is the same thing we did in relation to volume discounts with bus fares. It is the reason, Sir, that our entire approach to this programme, from the beginning, has been that the burden of the adjustment must be shared fairly and equitably.
And it has been. Those who are being asked to contribute through adjustments to land tax are also those who will benefit significantly from lower income taxes from July and again in January, and who are already in other instances receiving significant income and corporation tax reductions.
Mr. Speaker Sir, we will not blindly adhere to policies which are unbearable for our people. We have a mandate to adhere to the Barbados Economic Recovery and Transformation Plan, Mr. Speaker but the BERT Plan was designed to provide stability and recovery for our economy.
And we shall do so with fairness and equity always.
I am obliged to you.