Kenton Palmer | Address gross inequity of property tax

The purpose of property tax is to fund the responsibilities of Local Authorities. According to the National Land Agency (NLA) the basis of the assessment is the value of unimproved land, which is the value that the land would be sold for if it was a vacant lot. Over the years, property values in Upper St Andrew have skyrocketed while values in Lower St Andrew have fallen.

Many would be alarmed at the following: (i) Land valuation assessment is arbitrary and bears little relation to market conditions. (ii) Properties within proximity can have substantially difference values. (iii) Per acre, values are highest in lower income communities. (iv) Government writes off billions in collectable tax annually. The information used in this analysis is obtained strictly from public sources: National Land Agency (NLA); Tax Administration Jamaica (TAJ); Ministry of Justice; Companies Office; and Google Earth.

UPPER INCOME COMMUNITIES

Consider three adjoining properties in Norbrook and each being approximately one acre in size. One is a single-family dwelling, one is a townhouse complex, and one is a strata complex. Based on the NLA assessment in 2024/5, the single-family dwelling is valued at $10.7 million, the townhouse complex at $34.1 million and the strata complex at $22.1 million. Not only is there a wide discrepancy, land of this size in Norbrook could easily be sold for more than $100 million. A similar analysis in Russell Heights confirmed these inconsistencies.

LOWER INCOME COMMUNITIES

The Long Mountain Range area runs from Tankerville Avenue through Top Range, Mountain View Gardens to the foot of Wareika Hill. Lot sizes at the southern end are considerably smaller than those in Upper St Andrew. However, based on the NLA assessment, an acre of land in this area would have an unimproved value of $ 16.9 million or 57 per cent more than the same space in Norbrook.

In general, NLA assess lands south of Old Hope Road to be more expensive than lands on the northern side.

COMPLIANCE

A non-scientific sampling across the Corporate Area shows a full compliance rate of between 30 per cent and 40 per cent. Full compliance means payment in full or one-fourth of the assessed amount within 30 days of the start of the fiscal quarters. Most persons disregard the due dates but make full payment within the year. As a result, the full compliance rate can climb to about 70 per cent by year-end with the other 30 per cent continuing in full delinquency. The bulk of the delinquencies occur in the more affluent communities with single-family dwellings. Some of the communities falling at or below the Corporate Area average are Beverley Hills (20 per cent), Millsborough (30 per cent), Hope Pastures (30 per cent), Barbican (30 per cent), Leas Flat (20 per cent) and Nannyville (10 per cent). Communities at or above average are: Top Range (70 per cent), Cherry Gardens (60 per cent), and Billy Dunn (50 per cent).

PENALTY AND INTEREST

Contrary to TAJ’s pronouncements, interest is not charged on outstanding balances. A one-off penalty of 10 per cent is charged after one year. The penalty remains at this level for the life of the debt which is seven years if not paid.

In April 2016 property tax arrears was $13.4 billion. That figure could be above $20 billion today. This constitutes a write-off of more than $3 billion annually. If interest was to be applied in the manner prescribed by TAJ, the figure could rise to more than $6 billion annually.

PERSONAL DEBT OR PROPERTY CHARGE?

Property tax is payable by all persons in possession defined by, the owner, occupier, mortgagee in possession or other person in actual possession of such property. This is most confusing. In a case of adverse possession with time to run before the claim of legal title, is the squatter liable for the land tax and can he be sued? Where someone rents a property on short term, does that person, as an occupier, immediately assume all the outstanding land tax liabilities of the past?

Legal challenges should not be antagonistic as was the case in Constant Spring Golf Club v Collector of Taxes (2023). There is no need to attach liability to every person who happens to encounter the property. The property isn’t going anywhere soon. Liability should be attached to the property and not expose individuals to imprisonment.

THE INEQUITIES

It is evident that the lower income communities carry a disproportionate burden in funding local government responsibilities. Their level of compliance flies in the face of the narratives. To make matters worse, they benefit the least.

SOLUTIONS

1. The last valuation was done in 2017. The underlying principles must be changed to reflect the current trends as well as remove parameters that yield extreme results. The gross anomalies between low income and upper income communities must be corrected. Where the new valuation causes hardship the Land Tax Relief Act should be used to lessen the burden.

2. Interest and penalty must be applied in a manner that encourages timely settlement. Landowners should not be allowed to escape liability by just waiting on the next tax cycle for a write-off.

3. A loss of $3 billion per year (possibly $6 billion if interest is applied) would warrant the establishment of a specialist court to fast-track claims and not cause further strain on the current court system.

4. Property tax liability should be convertible to a charge on the property without a complicated legal process. Government should recover debt by forfeiture and sale of the related property.

5. Rather than expunge records after 7 years, liens should be placed on properties in default.

6. Government should employ private agencies to assist with the collection process. They should have authority to take legal actions.

Kenton Palmer is an electrical engineer, a former managing director of Crown Caribbean, a Caribbean group of companies. Send feedback to columns@gleanerjm.com and kentonpalmer@yahoo.com.