Jamaica
News - Real Estate - Finance
The Jamaica Observer, May 1, 2005)
Lower tax for 60% of land parcels
Owners of over 60 per cent of all parcels of land
in Jamaica will see a net reduction in property tax once the new tax regime,
announced this month by the finance minister, Dr Omar Davies, is implemented.
With the new regime, most analysts suggest,
individuals who own land valued below $500,000 and above $5 million will pay
less in taxes - up to $500 less for property valued below $500,000 and from
$20,000 to $1.5 million less for property valued above $5 million.
This break will apply to owners of 422,000
parcels of land or 62 per cent of the 680,000 parcels which the National Land
Agency estimates are spread across Jamaica.
Conversely, though, individuals with property
valued between J$500,000 and J$5 million will pay up to $13,000 more a year in
property tax.
The Matalon tax reform committee, whose report
Davies used as the platform for changes of the country's tax arrangements he
announced this month, had recommended a threshold of $300,000 up to which people
would pay a flat rate of $600. On values above that threshold, Matalon proposed
that a one per cent rate should apply.
Previously, property values were split into
bands or ranges to which flat rates, varying from $600 t0 $3 million dollars,
were applied.
Davies kept the Matalon threshold and the rate up
to be applied up that level. However, the finance minister halved, to 0.5 per
cent, the rate to be applied for property tax after a value of $300,000.
The Matalon committee, in its analysis, had
said that with its proposal, all property valued less than $400,000 and greater
than $5 million would benefit from the rate change - leaving all others to pay
more.
With the Matalon proposal, 356,600, would pay
less. This is 65,400 fewer than the Davies plan.
If the Matalon proposal had been implemented
in full, persons in the $400,000 to $5 million value bracket would pay up to
$37,000 more in property taxes, compared to the $13,000 under the Davies
programme.
Of the 422,000 lots subject to less tax, 415,000
are valued under $500,000 and only 7,600 or one per cent of all land parcels are
valued at higher than $5 million.
The rationale for reducing the rate and
increasing the threshold was that high tax rates created incentives for tax
evasion and special exemptions. Thus, the recommendation was expected to improve
compliance, now estimated at 40 per cent and to grow government tax revenue from
land at a rate of nine per cent per year, starting with an additional $600
million in the first year.
While the recent proposal made by the finance
ministry in the budget for 2005/2006 addressed the issue of compliance, it did
not mention what the impact would be on tax revenue by imposing a 0.5 per cent
tax rate instead of 1 per cent.
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