Nobody likes to pay taxes. In fact there is a booming industry of experts who make a living helping persons to avoid paying taxes. Many of us will remember the Bible story of Zaccheus who was a most unpopular figure in his time because he was a tax collector, and a dishonest one at that. However, even the teachings of the Bible support the need to pay taxes. In Romans 13:7 it is written: “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed”. Similarly, when the Pharisees tried to entangle Jesus they asked him whether it was lawful to pay taxes to Caesar. His response was: “Render unto Caesar the things that are Caesar’s”. As sure as the sun rises in the east, there will always be taxes. Taxes are the main source of consistent revenue for every country. They are used to fund the services that citizens need in order to enjoy a good quality of life. It is our civic responsibility as citizens to pay our taxes – as our contribution to the administration of our country. Anyone who says or thinks otherwise is divorced from reality.
That being said, what our country can benefit from is a more equitable, less burdensome system of taxation. Especially at this time of economic stagnation, the imposition of higher taxes can have a crippling effect on citizens. This was probably what former Chief Minister Hubert Hughes meant when he said “you can’t tax a dead economy”. The recent implementation of the new property tax system has resulted in an outcry from the general public. Citizens and residents, who are already groaning under the weight of their personal fiscal deficits, are under further pressure to pay their taxes. In response, the Chief Minister has sought to reassure persons that efforts will be made to alleviate the burden. There is little chance that his assurances will be enough. While I find the advice given to people by various media – not to pay their taxes – to be abhorrent and irresponsible, I do believe there is need for a reexamination of the current system. As such, I took it upon myself to do a bit of research and found a paper – by two researchers, De Cesare and Ruddock from the University of Salford, United Kingdom – entitled An Empirical Analysis of a Property Tax System: a Case Study from Brazil, which was published by the World Bank. What these researchers said about property taxes was quite instructive:
At local government level, property taxes can be considered one of the most popular options for raising revenue for financing public services.
Some well-known characteristics of property taxes are likely to contribute to their popularity in integrating taxation systems. For instance, property taxes are considered easy to understand and enforce payment. They are cheap to collect and administer, difficult to evade, capable of producing a large and predictable yield….
…In spite of their high popularity in integrating taxation systems, property taxes are not free from imperfections. Indeed, administrators of property taxes face serious difficulties in establishing their systems. Property taxes are strongly criticised due to inequities present in current systems.
…. In many cases, high-value properties tend to be under-appraised relative to low-value properties. Another major criticism concerns the relatively higher burden placed on low-income taxpayers. Indeed, the most usual tax bases adopted, i.e. real estate market values, rental values and site values, are not related directly to ability-to-pay.
‘Assessment inequities can both reduce the tax base and cause taxpayers to lose confidence in the system. Due to their high visibility, property taxes are subject to extensive pressures because unfairness, inefficiency, and administrative problems are clearly perceptible’ (Kitchen, 1992).
It seems therefore that innate in property tax systems are the deficiencies and challenges that we are experiencing here in Anguilla. While we like to say that Anguilla is unique, we are certainly not unique when it comes to the inequities of our property tax system. The researchers mentioned above, De Cesare and Ruddock, identified this as one of the main objections to property tax systems:
If equity in taxation is understood as the relationship between tax and the ability-to-pay, there is little consensus about its existence in property taxes. In general, a good relationship between wealth and real estate holdings seems to exist with ownership being concentrated among high income groups. However, a number of exceptions to this assumption must be considered in that some low-income families might be exposed to heavy burdens (Aaron, 1975). It may be a major factor contributing to the unpopularity of property taxes.
With all its imperfections, one must ask whether this new property tax system was the best way for the Government to raise needed revenue. Perhaps there is a need to go back to the drawing board and reconsider which tax measures make the most sense. There must also be additional emphasis placed on collecting the taxes that are owed. It is common knowledge that there is much work to be done in the area of tax compliance. Government may find that if it did a better job of collecting existing taxes, there may be no need for additions or increases. I do not purport to have the solutions. There are many qualified people in Government who have the capacity to come up with those, but I do know that Government must balance its need for revenue with the ability of the populace to pay. It is a delicate balance but it is achievable.
