THE owners of 8,000 parcels of land held in trust will benefit from the reduction in transfer tax and stamp duties that prior to last Monday made the completion of the transfers very costly, according to Minister of Finance and the Public Service Audley Shaw.
The reduction was part of Shaw's overall plans for the fiscal year aimed at "unlocking unproductive assets" and providing access to better rates overall to drive productivity and growth in the economy. The transfer tax has been reduced from four per cent to 1.5 per cent of the value of the property, effective last Monday, while stamp duty on estates has been reduced from three per cent to a nominal rate ranging from $5,000 or 0.05 per cent to $25,000 or 0.06 per cent, depending on the value of the land.
"What we have now done is to make stamp duty just a nominal rate in relation to the value of the land," Shaw told Observer editors and reporters at this week's Monday Exchange.
For example, according to the scaling, if the land is valued at $10 million, the stamp duty would be $5,000. "The scale goes up to in excess of $40 million where the final amount is $25,000. Just nominal," Shaw explained.
It is the second time that Shaw has reduced the transfer tax since he became finance minister. In the first instance, the tax was reduced from seven per cent to four per cent.
"So, the overall tax structure then for estate taxes is down from over seven per cent to 1.5 per cent. It's easier to find 1.5 per cent than 7.5 per cent. It goes without saying, it's impatient of debate," Shaw said. Stamp duty has also been reduced from in excess of three per cent to the current rate.
Shaw also challenged opposition spokesman on national security and member of Parliament for Central Manchester Peter Bunting's claim that the reduction in the estate taxes would only benefit the wealthy. Shaw said that of the 8,000 parcels of land that are tied up, 5,000 of them are tied up because the owners could not afford to transfer them at the higher tax rates.
"I heard Mr Peter Bunting on a television programme last week saying that we have done nothing for the poor, because the poor don't have no estate. Well, he is dead wrong. The poor do have estates and the poor bequeath and sometimes even if they don't have it, estates are bequeathed to the poor," Shaw said.
"He is dead wrong because we now have between the administrator general's department, the national land agency, the supreme court and the stamp duty office, there are over 8,000 parcels of land of various sizes and values, and so on, that are now tied up in administration. The main reason, however, for that tying up in administration is the inability of the families to upfront the 7.5 per cent in transfer tax and stamp duties that are required to be paid before any final processing and issuing of titles can be done. I'm told that of the 8,000 about 5,000 are directly related to their inability of finding that upfront money," he added.
Shaw said that the decision to reduce the taxes stemmed from the desire to stimulate the market, but that the effect of the initiative may take some time to pass through the system. "The point that I'm making, the point of that strategy is to unlock unproductive assets that can become productive. That initiative, we believe, is not an initiative that reveals itself over three or six months. You have to follow that over a year or two to see how that process is implemented," he said.
However, the reduction in transfer tax and stamp duty is not retroactive. Therefore, persons who have already started proceedings on their estates at the original rates would have to conclude them at those rates, Shaw advised.
Other measures that came into effect on Monday, which Shaw said would also help stimulate growth, include the elimination of stamp duty on the refinancing of loans and the elimination of transfer tax and stamp duties on the transfer of corporate bonds and securities.
"Why am I doing that? Here again I am creating new avenues, new windows to encourage financing of projects, and here again that becomes another window of competition to a commercial banking system that has proven to be virtually inflexible in relation to all the things that I have been throwing at them," Shaw said.
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