Wealthy landowners should pay more in tax than salaried workers

31.MAY.11

Editor: Permit me a little space in your esteemed newspaper to raise an issue which, seen from abroad, gives me much food for thought.

In these tough economic times, the SVG government, like all governments throughout the world, is struggling to make ends meet.{{more}} We hear talk of “expanding budget deficit”, “rising national debt” and “tax consolidation”. At the same time, leading international bodies, like the OECD and IMF, are gradually coming to the view that national taxation should be based primarily around (a) taxing consumption and (b) taxing immovable land/ property, and that the taxation of incomes should be sort of residual, intended to make up any shortfall.

The ULP administration must be commended for dealing with the first of these, by introducing VAT. That said, though, the government has not gone far enough. It should have simultaneously reduced income tax rates to no higher than 15%, scrapping all allowances, reliefs and deductions in the process. To pay for it all, the government should have hiked up land taxes.

Why should a teacher, nurse or civil servant, earning a paltry salary of $ 3000 per month or less, pay more in direct taxes than a wealthy landowner who owns several acres of land valued in the millions of dollars?

In a country like SVG, the objective should be to tax wealth, and not just incomes. Otherwise, we have the anomaly alluded to in the question above, where those who have least, could end up paying the most, at least pro rata. A system that taxes the inheritors of land, and land speculators, is a much fairer way to go. Those people who put land to productive use will have generated the gains to pay the tax. Those who hoard land or keep land idle and unused, should be penalized for preventing the circulation of capital in the economy.

The pitiful rates of land tax that currently apply retard the economy, and should be hiked up substantially, so that land attracts about 3 cents per square foot in taxes in each year, compared to the paltry flat $10 or so it does now. Were this the case, the government could be raising $1200 per acre rather than the $10 it does now. Some exemption for the first half acre on which the taxpayer’s home is situated, may be exempt, on the basis that the residence already attracts House Tax. This would give rise to a much fairer system, and is less punitive on the poor. Most welltodo Vincentians store their wealth in land, and by taxing it properly, the government will be doing a great service to society, by forcing landowners to put such assets into productive use, while at the same time, raising much needed revenue for the economy.

Any failure to implement such a system may lead the poor to believe that the government acts solely in the interest of the landed rich (which includes several government ministers), and not in the overall interest of the country.

Yours truly

Concerned in the Diaspora